- Long Term vs Short Term Tenure
- Scope of Financing
- Terms & Conditions
- Best Rates
- Incentives
- Ease/Convenience of Repayment
- Fixed Interest Rate vs Variable Interest Rate
- Flexible Repayment
Long Term vs Short Term Tenure
Tenure refers to the duration of the loan; from the time the loan is released up till loan maturity. The tenure will be used to determine your repayment amount and total interest paid over the life of your loan. Your house may be your most important asset and a big portion of your monthly income goes into loan repayment.
Based on your financial ability, your long term spending pattern and age bracket, only then should you decide which repayment scheme would suit you most. 30 - 35 years is the most common repayment tenure that Banks offer. However, the longer you extend your term of financing, the lower your monthly repayment will be. A lower repayment means you don't need so much income and can afford to buy a more expensive house.
Deciding on whether to go for a long loan term or short loan term will depend on how fast you want to pay off your loan. For short-term loan, the installment repayment is usually higher than long-term loan because of the period of repayment is shorter. The advantage of a long-term loan is to have the advantage of a lower repayment.Scope of Financing
There are other related expenses such as insurance, legal fees, stamp duty, etc which is part of your initial costs in buying a house. In order to ease your up-front expenses some of these costs can be financed.
Terms & Conditions
A bank may be offering competitive rates but there may be certain unfavorable terms and conditions attached to it. So, read the fine prints before signing on the dotted line!
Best Rates
Hunt for the best home loan rates offered by banks as this contributes to the total cost of the loan. However it must also be noted that lowest rate does not necessarily mean the best offer.
Incentives
Nowadays we find that many loan incentives are offered, such as waiving processing fees, free legal fees, discount on insurance premium, or free credit cards. The best incentives are those that offer the best long-term savings.
Ease/Convenience of Repayment
These factors should be considered in order to determine the selection to take up your loans.
- Large network of branches, hence the ease of making payments
- Flexibility to pay through associated companies
- Auto deduction of payment through Standing Instruction
Fixed Interest Rate vs Variable Interest Rate
Fixed Interest Rate
The purpose of fixed rate is to recommend the protection from increasing interest rate. The advantage of fixed rate is it offers fixed monthly payments for the entire term of the loan and guarantee that interest rate will still constant even if the market interest rate hikes up.
Variable Interest RateUnlike fixed interest rate that remain fixed, variable rate loan however, may have a lower interest rate but has the potential to change amidst to the market forces. Some people favor fixed-rate loans because they know exactly how much they need to pay every month.
Flexible Repayment
Repayments are payable at regular intervals throughout the term of the loan. For most other financial institutions, the better part of repayments for the first years is absorbed by the interest component of the loan.
Some of the flexibility in repayment terms is:
- Monthly repayment
- Yearly repayment
