Things are changing
drastically, and so is the trend among Real Estate Developers as they are
working hard to make your dream of owning a house a reality. Buying a home is a huge decision and there is a
lot to learn before you start shopping for your dream home. Whether you're a first home
buyer, refinancing your home
loan or purchasing an investment property, we understand
that at times comparing and understanding home loan information can feel like
trying to decrypt some encrypted Morse code.
So here are some
things you should consider while applying for Home Loan:
Loan Requirement: It is significant to ask advice of lenders but where money is involved,
there is only one person who knows what’s best for you i.e. you! Sorting out your loan amount is just a step
to prove towards home ownership so it’s essential to work out how much you can
afford to borrow. As the loan amount will control your regular mortgage
repayments so it’s important you don’t borrow more than you can afford to pay
off. For calculation of requisite loan amount, assess your income and expenses.
·
Purpose
of Loan: First thing is to mention the purpose of loan
to lending institutions.
The reason for this is there are certain features you may need depending on the
purpose of your desired loan and particular lenders who will be able to fulfill
your needs.
Purpose of your loan
differs like:
- Live in the property bought - This is for anyone including first
home buyers that will reside in the property they wish to purchase.
- As an investment property - If you purchase a property to rent out or to renovate
and sell, then you may need to apply for an investment loan.
- Line of credit - A line of credit allows you to access the equity in
your home and use that money for whatever the purpose is. It can be for a
holiday or renovations.
- Reversal of mortgage – Reverse mortgage might interest you when you cross the
age of 60. If you own your own home, this type of loan allows you to borrow
money against the equity in your home and use as you desire.
·
Types of Loan: Hesitation arrives with borrowers
to decide which type of loan is best to them. Most of them are positive but one of the most
common emotions between them is fear of selecting wrong type of home loan.
So to reduce some
stress, Squarefeet Group has laid
out some pros and cons of all different categories of loan.
·
Fixed Mortgage
Pros – Securing your
interest rate guarantees that your repayments will remain the same for a set
period of time generally from 1 to 10 years and gives you protection against
rate rises. The upside is that it will allow you to budget more accurately as
your regular repayments will remain the same, instead of fluctuating with rate
rises and declines.
Cons – If interest rates drops,
you will miss out on the savings because your rate will not change. Fixed rates
are also usually higher than variable rates because you are paying for the
security that your rate won’t move for the set period of time.
·
Variable Mortgage
Pros – If the cash rate
falls, your variable rate is likely to decrease and so will your repayments.
Variable interest rates are also generally lower than fixed rates.
Cons - If interest rates
rise, so will your repayments. Variable rate loans are harder to budget for as
your repayments may differ from month to month depending on whether your lender
increases or decreases your rate.
·
Low
Documentation
Pros –A low doc i.e. low documentation home loan is designed for people who
can’t provide the usual paperwork required when applying for a loan. Usually there
is no need to provide pay slips and tax returns however you must state your
income and you must be able to prove that you can meet the repayments.
Cons – Usually with this
type of loan the interest rate is higher than regular home loans. You may also
be charged additional fees such as ‘risk fees’. Low doc loans are considered a
higher risk loan for lenders so they may ask you to provide other assets, such
as your car, for security against the loan.
·
Introductory Rate
Pros – A lower interest rate
is offered for a specific amount of time by this type of loan. Focused at first
home buyers who are inexperienced in paying off a mortgage, intro loans can be
used as a great way to ease them into the home loan market.
Cons –The interest rate
reverts to a higher interest rate, after the introductory period ends. This may
not be the best deal on the market. You could therefore end up paying a lot
more in interest over the entire loan term than if you chose a cheaper deal to
begin with.
·
Deposit Needed: Saving for a home loan deposit and
knowing how much to save is the first big hurdle home buyers face. The minimum
deposit required will depend on the type of loan chosen and the financial
institution but there is an industry standard one is obliged to.
Whether it’s your first
or twenty-first loan, and whether you apply directly or through a mortgage
broker, here’s a checklist of things listed by Squarefeet Group that a lending institution will consider:
·
Can you repay
the loan?
·
Do you know
what your living expenses are?
·
Is your credit
rating ok?
·
Do you have a
stable employment?
·
Do you have a
savings history?
·
Have you
considered your current net worth?
·
Do you have a
regular or efficient deposit?
Buying your first home is an exciting moment in your
life. It is also a big decision. If you follow these tips, you’ll
be a home owner in no time.Squrefeet Group help you to buy property in thane.
Sources:
Canstar/ Rate City/ LIFEHACKER India
