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Bank Home Loan Questions

If you’re on the prowl for the perfect house with the perfect garden in the perfect neighbourhood, you are probably sick and tired of hearing how this is the single most important purchase that you will ever make in your life! And that you must do your homework very carefully to find the home that will suit your needs and requirements the best. And of course, that you should not buy a house that you will not be able to afford. Let’s face it, some of those statements are so obvious that you feel like strangling the next person who makes such a comment.

You would on the other hand appreciate some advice on getting the perfect bank home loan much more than all these other house hunting tips. Consider asking the following couple of questions when it is time to apply for your home loan:

What type of interest rate should I opt for? You will generally be offered one of two options: A fixed rate or an adjustable rate. An adjustable rate will fluctuate up and down as the interest rate changes. If you acquire the home loan when the interest rate is quite high, you will benefit from an adjustable rate as your monthly installment will decrease if the interest rate goes down. However, if your home loan was acquired when the interest rate was low, your monthly installment can drastically increase as the interest rate sneaks up. With a fixed rate you will always know exactly what your monthly installment will be – no surprises! The only drawback to a fixed rate is that it is usually fixed at a higher rate than the interest rate at the time of your application. But once again, you will be protected if the interest rate goes up, so timing is very important when fixing a home loan.

Will I have the option of a payment holiday on my bank home loan? A payment holiday gives you the option to stop paying your monthly installments for a couple of months. You are not required to give a reason for wanting to take a payment holiday and the bank has no option but to accept it (if it was part of your initial agreement of course!) In case of an emergency where you suddenly have unforeseen expenses, this will come in very handy! Just remember that the installments you miss must still be paid back. So you will either have to extend your repayment period, or increase your monthly installments to cover this.

Will I be charged an early settlement penalty? Remember that on top of your home loan amount, you also pay the company/lender money for the privilege of using their money. Interest is charged on the total outstanding amount, so if you pay the bank home loan back sooner than agreed the company might lose out on a lot of interest and charge you a penalty fee. Do the maths and decide if you will be saving more by paying off early than what the penalty fee would be.

Happy house hunting! May your bank home loan application be painless and successful!

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