A BRIEF GUIDE ON HOME LOANS
There are many home loans to choose from in this day and age. You should opt for one that suits your financial capabilities and personal goals. There are generally two types of home loans to consider: a traditional loan or a flexible loan. The traditional loan (as you’ve guessed it) obligates you to pay a fixed sum every month until the tenure ends. The flexible loan allows you to lower your interest as and when you deem necessary.
For example, With a flexible loan, you are allowed to pay off your home loan in full before it reaches the end of its tenure, although you may likely incur a penalty of 2-3% from the principal loan amount. You can also pay less interest by parking money into your linked current account. If you work a job that guarantees you a stable income, you may want to go for a traditional loan to have peace of mind. If you like having flexibility in managing your loan, you may do better with the flexible loan instead.
As with all types of loans, you should put in some extra hours researching for the best bank that will offer you the lowest interest rate. Do not disregard nor underestimate the tiniest difference between rates. You will end up paying much more than you imagined.
You also need to think about the margin of financing or how much the bank is willing to lend to you. This depends on the value of the property and your track record with the bank. If you have been building positive credit, it would reflect on your loan application and banks may be happy enough to reward you with a larger margin of financing. This is extremely useful if you do not have sufficient cash to pay upfront.
Apart from going with the bank that offers the lowest interest rate, it is crucial to consider other elements of the bank you’re doing business with. You are going to stick with each other for a long time, so you may want to consider the bank’s reputation, the standard of service, and nearest branch among other things. Good luck!