Every Filipino’s dream is to own a house. And as far as dream houses go, there can be no limit to one’s imagination.
Not everyone can afford to pay in full, so we resort to taking up a home loan from the bank. It’s the convenient, most practical way of owning your dream house without having to spend most of your working years saving up for it. But a bank loan isn’t something that you get on the spot, as it requires a lot of time comparing and negotiating before you seal the deal. Delaying it could also mean losing kaching because you might find yourself overrun by housing expenses even before your funds are released.
To prevent you from going through the same mistakes as with most pinoys, here are a few scenarios you should avoid:
Misdeclare Your Finances
If you think you can outsmart the banks by changing or withholding your financial information, think again. You see, banks may appear to be like divas who are always at each others throat. But behind all the cattiness, they are conniving bitches sharing info as to who can sit with them during lunch breaks.
Banks will always check and verify your information. So if they see that you’ve got payment issues previously with your credit card, or loans under your name without you declaring it, they will put a red flag to it and this may cause them to decline your loan application.
Not Consider Long Term Savings
We all see promotional offers left and right and it seems very attractive when the ad says “low financing” or “no downpayment”. And when you fall prey with the sweet talk and charm by your sales agent, you might end up biting more than you can chew.
When presented with the fine print, don’t just ogle at low interest rates. That is just the tip of the iceberg because these interest rates are usually offered on a promotional basis, which is only good for a year, then “subject to repricing” thereafter. A promo rate of 7% for 2 years is much lower compared to 11% for 25 years, but the latter puts you out of risk should there be any sudden fluctuations when economic conditions go bad.
I’m not saying promo rates are bad. If you think you can pay in full after the promo tenure then go ahead. Bottom line is, long term fixed interest rates will give you enough buffer to pay off your loan and minimize your risk if interest rates increase. More than low interest rates, I think we all have to look at having the security and peace of mind which is priceless.
Overlook Home Loan Fees and Other Charges
When buying a house, don’t just look at the purchase price alone. This may not be common knowledge to all, but there are other things that needed to be factored in such as:
- Value Added Tax @ 12%
- Documentary Stamp Tax, which is based on 1.5% of the sales price or property valuation, whichever is higher
- Local Transfer Tax (usually @ 0.5%)
- Registration Fees
Missing out on any of these could lead to delayed processing of your loan. Thats why it is important to do your home work first and make rounds of comparison from various banks to see which one can give better option and offer subsidy for these charges.
If it’s your first time doing all these, it won’t hurt to ask and consult a property agent or a lawyer especially on the mortgage and titling processes in your city.
The concept of having a safety net when the need arise is still not clear for most filipinos. Having an insurance in place when taking a home loan is as important as breathing because you give the bank an assurance should anything untoward happen to the borrower.
The most common insurance banks require is the Mortgage Redemption Insurance (MRI) and fire insurance for the property itself – both of which should cover the loan in case of the borrower’s untimely demise. Both types of insurance are needed for the loan approval, and both have their own process. If you don’t apply for insurance on time, then you risk delaying your loan.
Not Reading the Contract’s “Terms & Conditions”
Look, it isn’t enough that your property agent discussed what is enclosed in the terms and condition part. You have to read and understand every part of it because this is one investment you don’t want to screw up especially that it involves your hard earned cash. The same principle applies once you have the mortgage loan agreement from the bank. And if something doesn’t appear to be clear, just ask. Ask your loan officer to point out important things you need to know like instalment amount, margin of finance, penalties for early repayment and other charges.
At the end of the day, investing always has risks, and how you manage your risk is your personal look out. Having the knowledge and a good judgement can help you breeze through the home loan process and eliminate the chance of you committing major mistakes.
Do you have any home loan experience to share? Tell us about it by leaving a comment below.