Bank Home Loan Questions

Bank Home Loan Questions

Bank Home Loan Questions

If you are in the process of buying your own home for the first time, you are probably already sick and tired of hearing how important it is to do your homework properly in order to find the house that would suit your needs, requirements and wallet the best. By this time you also know that you should not buy a house that you will not able to afford. Some of these comments are so obvious that you might just strangle the next person who tries to give you advice.

All you want is that perfect little house in the perfect neighbourhood with the perfect cat and dog running around in the garden!

In the meantime, you are struggling with so many bank home loan questions that some advice on that subject would be much more valuable! Herewith then a couple of things to ask and consider when applying for a home loan:

Should I opt for a fixed interest rate or would a variable interest rate suit me better? These are usually the two options that you will be able to choose from. If the interest rate changes, an adjustable rate will also fluctuate up and down. This will be beneficial to you if you take out the home loan when the insurance rate is quite high, because your monthly installment will be lower as soon as the interest rate goes down. On the other hand, if you got the home loan when the interest rate was not very high, this interest rate can quickly increase drastically and result in sky-high monthly premiums! With a fixed rate you have the financial security of always knowing how much you will be paying each month and you will never be caught unaware. The only negative thing about a fixed rate is that the rate will be fixed at a higher rate than the interest rate at the time of your home loan application. This is however not a bad thing if you acquire the home loan when the interest rate is very low.

Will I have the opportunity to take a payment holiday on my home loan repayments? If you have the option of a payment holiday on your mortgage the bank must allow you to stop paying your monthly installments for a couple of months. This is extremely beneficial in the event of sudden unexpected expenses and will allow you some room to breathe. You do not have to offer any explanations for deciding to take the payment holiday; if it was part of your initial agreement, you have the right to make use of this holiday whenever required. Just keep in mind that the installments you skip must still be paid back - you will either have to increase your monthly repayment amount or extend your payment period 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 home loan application be painless and successful!

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