Most Filipinos are under no illusion that buying a house isn’t going to be pricey even with proper financing. However, many housing loans are costlier than they initially seemed. Without paying attention to the small things and thinking with foresight, you might be tied to an unfavorable mortgage.
When applying for a housing loan, watch out for the following:
High Loan-to-Value Ratio
Most borrowers don’t want to pay large amounts money upfront, but loans with high loan-to-value ratios are not without downsides.
Even if you’re allowed to borrow up to 90% of the property’s selling price, maximizing the loanable amount you qualify for would cost you more interest and might increase your monthly amortization.
Many Lancaster New City reviews would advise you to pay as much down payment as possible. The greater portion of the property’s price you shoulder, the less you have to borrow. In turn, you can save on interest over time, and keep your monthly amortization to a minimum regardless of the loan’s term.
Frequent Interest Re-Repricing
Most housing loans in the Philippines have ever-changing interest. If you’re hunting for the lowest rate, don’t think that it would stay fixed throughout the life of your mortgage. There’s a great chance that it’s bound to increase in as fast as one year.
Most banks can tell how much your interest would increase over a specified period. If you lock in your rate for a longer time, strongly consider it for your security and peace of mind.
Early Termination Penalty
Not all lenders allow you to pay off your housing loan early without any penalty. Some mortgage providers don’t like prepayment because it diminishes their profit from interest. They might charge a significant amount of money to dampen the incentives of this practice.
Before you sign the contract, read the fine print to know whether the deal comes with an early termination penalty.
Taking housing loans at face value might come with literally costly consequences. Considering a mortgage is usually a decades-long financial commitment, exercise due diligence to know exactly what you’re getting into.