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5 Crucial Stress Reducing Tips When Acquiring A Home Loan

5 Crucial Stress Reducing Tips When Acquiring A Home Loan

Owning a home is one of the most desired dreams of most people. However, buying a home requires major and sometimes difficult financial decisions because of the large amounts always involved in such transactions. Even the renowned businessman Warren Buffet once shared his thoughts on real estate: “When people are making the decision of the magnitude of buying a house, it’s the biggest decision a great many families will ever make.” Coincidentally, the current Singapore residential property market is significantly waning. Most people in Singapore are also of the opinion that home prices are not likely to increase in the near future, although the consensus is often wrong.

Apart from potential capital gains, there exist other good reasons for purchasing a home. One of the reasons includes getting a fixed mortgage rate that will hedge against inflation. The idea is good since when inflation rises, the debt value of the property will decrease hence paying the mortgage will be a lot easier. Wage inflation just as price inflation is able to get you and your family a roof over your heads. Once you have gathered the courage and decided to acquire a home using a home loan, the whole home loan process might be stressful. Fortunately, there exist some tips that might ease the whole process and make it stress-free. This article is meant to offer 5 simple but important tips for making the whole process less stressful for individuals anticipating to buy homes using the home loan.

  1. Make sure you can afford the home loan plus other monthly debts

Generally, it is a financial rule that your debt commitments on a monthly basis should be at most 35% of your monthly income. Apart from the mortgage, monthly debt commitments will include loans such as study loans, car loans, credit cards as well as other personal loans that are due at the end of the month. Lengthening the maturity period of the loan makes paying the debt payments easier and affordable. It gives you more time to plan on how you will meet the expenses efficiently when they are due. However, you should keep in mind that lengthening the maturity of the loan leads to an increase in the amount of interest to be paid.

  1. Have a proper contingency plan

The monthly repayments will always vary depending on not only the home you are purchasing but also on your current financial situation. It is common knowledge that whenever you fail to pay your monthly payments, the bank has legal right to reclaim your home. Such a situation would be dire to each and every person living in the homestead including children and other family members. For this reason, you should have other sources of extra money that should cater for the loan repayments if you get fired or if the interest rates increase following a rate rise.

If you are the family’s sole breadwinner and you are living with dependents, you should apply for mortgage insurance. The policy is referred to as Mortgage Reduced Team Assurance. It will partially or fully cater for the outstanding home loan when you are unable to repay the loan because of disability or even death. Having a proper contingency plan will save you from losing your dream home in times of financial insecurity.

  1. Take a hard look at the fixed or floating rate before deciding which one is better

More often, many money borrowers tend to emphasize on acquiring a loan that attracts the lowest interest rates from money lenders in the market. One example, Credit Hub Capital goes as low as 4% interest. Borrowers should choose between the fixed or floating rate and choose the one that is suitable for their financial needs. It is important to contemplate whether getting a loan with a higher fixed interest rate might be in line with your financial circumstances. On the other hand, the lowest floating rate may be the best option if you can access additional funds at a time when the interest rates were to increase. A fixed monthly payment is, however, the best option for proper money management purposes. Moreover, you can choose the fixed rate loan if you are purchasing an investment property. This is important since you will be able to control the rental income and use it to cater for the mortgage payments.

  1. Hire the services of a mortgage broker

It is without a doubt that many Singaporeans have the ability to use several financial product comparison websites available online to compare credit cards. On the flip side, many of them are not conversant with comparing mortgage brokers for purposes of finding the best home loan. There is also a misguided concept among many Singaporeans that a home loan will cost more if you use a mortgage broker. The notion is not true since you do not pay them even a single dime. The mortgage brokers earn a referral fee that is paid by the bank they have referred you to. Given their wealth of knowledge and expertise in the field, the brokers can recommend and direct you to the loan product that will suit your financial needs and situations.

  1. Refinance on a regular basis

In the past decades, progressively clearing the same home loan with the same bank over a period of many years was not only common but also rewarding. Unfortunately, banks do not reward their customers for such loyalty these days. The most promising model right now is the capitalist model since it abundantly rewards new customers who shop around and refinance regularly. Substituting your current home loan with another one that attracts a lower interest rate is a very simple process and it also leads to a decrease in the monthly repayments. You should, therefore, refinance after a few years and enjoy the benefits. Keep in mind the fees, petty penalties or restoration of benefits involved in the refinancing process to prevent them from exceeding you refinancing savings. In conclusion, having the correct financial tips on how to deal with home loans while buying a home will save you from stress and make the whole process easier.

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