How to take charge of your home loan

MANILA, Philippines – When you’re ready to take a step closer to your dream, you go all in.

This can be as simple as earning your first career milestone or saving up for a future home for you and your family.

Can you afford to buy a house soon? During the first quarter of 2016, CBRE reported that the average selling price for a 2-bedroom luxury condominium in Makati was above P180,000 per sqm. In BGC, the same amenities cost over P236,000 per sqm.

Despite the rising cost of real estate, the demand for residential properties remains steady as more and more families and individuals look forward to investing in their very own home.

Buying a home is a long-term commitment. But while it comes with its own set of challenges, being able to afford your very own home right now is not impossible.

Home loans are not the enemy

Not everyone can afford paying for a residential property in cash. Some are still saving up for the capital amount. Others simply don’t want to shell out their funds in one go for practical reasons.

That’s why home loans have always been an option for anyone who wants to purchase a new property, or undertake major renovations in their existing home.

You can apply for a home loan through banks, agencies such as Pag-Ibig and SSS, or developers’ in-house financing.

Keep in mind that you can’t take out a loan for a property’s full price. Banks, for example, would offer clients up to 80% of the estimated price of a new house. For construction and renovations, they can lend up to 60% of the total value of the land plus 80% of the appraised value of the proposed building based on the submitted plan and bill of materials.

Aside from pooling your capital for the difference, you’ll also need to provide sufficient proof your capability to pay off the loan balance.

These factors may make home loans seem like the enemy, tying you down to a financial commitment for an extended period. On top of the burden of paying the monthly amortization, inflation rates, daily needs, and emergencies could also affect your monthly budget and affect your lifestyle for the next few years.

With the right mindset and steps, loans can be your best tool towards providing a better life for your loved ones. It all depends to how you will manage and take responsibility of the commitment of paying it off for the years to come.

Bank loans can give you bigger possibilities

If you opt to take a home loan from a bank, there are several options to keep you on track while you are paying off your loan.

How much can you set aside to pay off a home loan right now? If it isn’t much, ask your bank for a loan term with low amortization. This means that you can pay off the loan amount in smaller installments within a longer time period.

Of course, you’ll have to pay higher interest in exchange for the extended payment period. Once your cash flow improves and becomes more stable, you can request a term amendment so you can fulfill the payment terms much faster.

You can also request for a fixed interest rate on your loan amount. This way, you have a clear prediction of how much you’ll need to pay off monthly. Market rates rise and fall over time, and this scheme protects you when prevailing interest rates go up.

If market rates drop significantly, you could still have the option to re-price your loan or sign on a different loan arrangement with the same bank to help you save money.

Be prepared, take charge

A home loan is a big commitment, so make sure that you’re prepared for it financially, mentally, and emotionally.

Make sure that your finances are in order. You can’t pay off a home loan if you don’t have a strict savings habit. Even before you choose your dream home, make sure that your personal funds can cover the down payment as well as processing fees that your bank may charge.

Be ready for some major lifestyle adjustments. A home loan can affect your household’s budget for other important things such as food, education, health, and leisure.

Do your research and look for a bank that offers highly flexible packages, promos, and even discounts. With careful planning, you can still spend for other important things in your life while you slowly work on your investment.

If you want to own a home, seek out the best possible option for you and your family. Go ahead and take charge of your dreams.  – Rappler.com