To get as little credit as possible for your dream home
Buying the first apartment in a person’s life is an important milestone. Especially if you take out a home loan for this. Before you jump into just listening to your emotions, there are a few points you should definitely go through.
Before the very first point, think about whether you need your own property. There are some considerations that will help you decide when to buy your own apartment.
1. Before taking out a home loan, make sure your income is stable
You need to be able to show this to the bank, and a kind of safety net for you. No matter how much you want to move into your own apartment or there is just a good buy option, you’d rather say no if the bar vibrates. Even if you somehow convince the bank to give you money, you still have to repay it. With an uncertain source of income behind you, you run the risk of the bank terminating your home loan agreement. And this results in the loss of the property.
It increases your stability if you have an emergency reserve that you live on for at least half a year (including the repayment of your home loan and the overhead of your new property) without having a single penny of income.
If, however, you find yourself in a situation where a source of income that you believe is safe will fade away after taking out a home loan, read the article that describes what you can do in the event of a payment difficulty.
2. Choose a property carefully.
Obviously, you need to do this before taking out a home loan. Realtors can tell lots and lots of stories about their clients falling in love with a property that wasn’t right for them at all. And after moving in, modification is very expensive, if at all possible.
To avoid making such a mistake, first determine what purpose that house will serve. Do you also want to live there as a retiree? Great, but choose a property that works for you even if you might have a hard time moving in your old days. A multi-stage property (possibly an upstairs block without an elevator) may not be a good example of this.
What is the repayment installment that you are guaranteed to spend on the loan and all other real estate-related expenses?
If you’ve calculated that, be the exception the realtors will talk about. This is because most people start looking for real estate from their maximum repayment option (i.e., looking above it) rather than below it. And this is so overwhelming for the family budget that there is nothing left.
3. Plan your family budget before taking out a home loan
Before you dive into a major capital-intensive expenditure (no, your own home is not an investment!). “There will be somehow” and “I will solve” is not thorough enough. The bank will look at one thing: whether the home loan has been repaid. If you see in your calculations that you are expected to have trouble in the beginning, choose a smaller property that is more sustainable for you.
Believe me, it didn’t feel good at the time as a bank employee to start implementing execution, and to send a client’s full loan material to the risk management. Just because she couldn’t repay. This could have been avoided if she had attended a counseling session. She was not given this, but you can use it in the contact menu.
Then we will look at what are the items that will definitely arise from a financial point of view. We will review the bank offers for you, you will also see the difference between them. We do the same with insurance.
All you have to do is see how much your life changes in the new house. So the question is not whether it would go now, but also how much different overhead and transportation is expected to be.
If you also want to have a child in the near future, check before you take out a home loan to see if the payment will go along with the cost of having a child. After all, you may not want to run to the bank with a tiny baby, that there’s something wrong.
4. Give back any unused credit card before requesting a home loan from the bank
With this step you are sure that you will not use a card that may give you credit quite expensive. And you increase the amount that the bank will be able to give you for a home loan. And with that, you may be able to buy the property that is actually for you.
5. Look carefully between loans
This is the point where we can actively help you, whether it is professional or purely numerical help. In the contact menu you can request a callback from us.
It doesn’t sound like much for one bank to give a half% interest rebate, or possibly “only” 0.1%. With a home loan of a huge amount, plus you pay for decades, it can even mean you save yourself the price of a smaller car. So it does quite matter what interest you start with, just as it does matter what the other conditions of the loan are.
6. Determine if fixed or variable interest rates are better for you.
You can also ask for our help in this, we will show you the difference. This will make it easy for you to choose a solution that is completely fit for you.
Variable interest rates can also be requested for a longer period. What you should keep in mind is that the loan interest rate may change after the interest period has expired.
If you look at the picture below, you can see that interest rates on loans are currently at a historic depth. This means that after the selected interest period, it is expected to increase the repayment of your home loan. Then you will bear the interest rate risk.
If you apply for a fixed rate loan, the interest rate risk will be borne by the bank, but they will make you to pay it. A bank loan with a fixed interest rate and a fixed repayment for up to 20 years will be granted to you by the bank with a higher initial repayment.
If you are thoroughly informed before borrowing, you can make the decision that works best for you.
7. See if there are any promotions or support that can help you
If you are eligible or use anything that can increase your self-sufficiency, apply for it before taking out a home loan. This is when you need a lower loan amount, which also reduces your start-up costs and your repayment installment.
If you only apply for support after borrowing, you still have the option to change it. This is called prepayment. Only then will the bank charge you the prepayment fee. This is no longer the case for promotions, if you didn’t ask for a discount before applying for a loan, that ship is gone.
8. Before taking out a home loan, think carefully about the term you want to take out.
There are some connections you need to understand. If you take out a loan for a shorter period of time, you will use the bank’s money for a shorter period of time. This reduces all interest repaid. It is true that you also have to repay the capital raised in a shorter time. This will make your repayment installment higher, but that doesn’t mean it will cost you more. In fact, this is how you pay back the least money.
If you ask to set the term of the loan for a longer period of time, the total interest repaid will be higher (after all, you will use the money longer), but a slightly lower amount may be better included in your family budget.
You should be aware that the installment does not increase or decrease proportionally as you change the maturity. Thus, twice the term will not lead to exactly half the installment, it will only be a little less.
Loans have a maximum term, which is determined by each bank. If you applied for a loan for a shorter term and for some reason still need a permanent reduction in the installment, you can still request an amendment. While for a time period set to maximum, you no longer have the option to do so.
- What is the point that you will definitely make before borrowing based on the above?
- To what extent do you think the above points will change in the event of a loan redemption (ie before taking out a new loan)?
- Is there anything you could add to the list above?
It is much easier to plan ahead than to put out a fire afterwards. If you are planning to take out a home loan, we can help you select and plan the right loan. You can contact us here.