Thursday, March 6, 2014
Applying for a housing loan can help you get closer to reaching your dream sooner, but much like making the decision to buy a home, a lot of careful planning and mindfulness should go into choosing the right loan plan. Here are five common oversights to avoid...
1. Not considering or comparing your loan options
Fees related to home loans do vary depending on the lender, and are negotiable as well. It’s highly advisable to 'shop around' for rates from different lenders before narrowing it down and committing to one. This process increases your chances of getting the best deal that fits your budget and income.
2. Not applying for loan insurance
If you don’t intend to pass on the loan to any of your family members, then apply for a mortgage redemption insurance (MRI) which will cover your payments in the worst-case scenario (i.e. the borrower’s untimely passing). This places the bank as the beneficiary and ensures that the house will still belong to the surviving family members.
3. Not checking your credit score beforehand
The logic behind the credit score in relation to applying for a house loan is simple: the higher your credit score, the lower your interest rate will be. Make sure that you’ve got your finances in check before applying.
4. Not understanding the fine details
Do your own research and ask away when it comes to understanding mortgage terms and other related questions and concerns that you may have. Arm yourself with the proper knowledge to avoid getting duped by lenders and agents.
5. Not going for a loan with fixed rates
Sure, the lure of lower interest rates and adjustable pricing might seem good to pass up, but the reality is, these promotional tricks end up doing more harm than good. Lenders tend to conceal the 'real' rate until later on when they blind side the borrower by hitting them with a high rate adjustment. Although it may be higher than the lower interest rates, The safest and most recommended route to take is to get a loan with a fixed rate.