9 Mortgage Loan mistakes Pinoys make
Taking a mortgage loan? Here are nine of the common mortgage loan mistakes that Filipinos make especially when they’re applying for it for the very first time. Read on, it is better to be safe than sorry.
Diving in when you’re Not Qualified
Banks, by nature, are generally eager to offer mortgage loans to qualified home buyers. The keyword, though, is “Qualified”. In the Philippines, a qualified mortgage loan applicant means that you are fit to with the banks qualifications like the amortization you have to pay is 30% of your gross monthly income and essentially have money enough for down payment. If you don’t fit the criteria, they’ll have no problem rejecting your application. So before you apply you’ll want to make sure you’ve done the necessary preparations and are not fighting a lost cause right from the start.
Mortgage Loan Application delaying
Banks take up to as fast as ten days to as long as two months on approving your loan depending on the case of the borrower. In reality, if you already picked out a design for your home and already paid for the down payment, house construction costs comes in which is not the best position to be in since you rarely have the money to pay for these if you are getting a loan. Just imagine the paper work and finance checks that banks put to this application process, delaying your application is not always a good idea.
Going Straight for the Lowest Interest Rate and Nothing Else
You’re going to borrow a big sum of money. Obviously, you’ll sign up with whoever offers you the lowest interest rate. Right? To a certain extent, it is. Your priority should definitely lies with getting the lowest possible interest rate, but you shouldn’t forget about things like margin of financing, lock-in period, and simple stuffs like making sure a branch is within your vicinity.
Here is a step-by-step guide in getting the best deals with the less effort!
Going for the Lowest Interest Rate and Opting for short-term re-pricing
Your aim is definitely to get the best interest possible and you opted for a short-term re-pricing. Usually these lower interest rates are only available on a promotional basis. Interest rate will vary depending on the market interest rate (which most of the time higher than the given rate) and if you do such a thing, you are actually paying more than you should. So who wins? It is better if it is you, the borrower. Always think long-term. Always!
Declaration of finances
Banks in the Philippines always ask for your credit history, like declaring your credit card/s, annual salary and properties owned or loaned which is part of the normal process. What consumers don’t know is that these banks cross-reference records with other financial institutions. One wrong declaration of your asset or liability can decline your mortgage loan application and delay you in creating your dream home.
Not Factoring in Your Home Loan Fees and Charges
Home loan involves fees, charges and even home insurances that may come as a surprise for the inexperienced home buyers. Some banks absorb part of these charges, whilst others may not. Most home buyers have limited funds (and hence the need to take a mortgage loan), so it is imperative that you understand these charges involved before you commit.
To understand the major fees and charges associated with buying a property through a mortgage loan, please refer to our article our info graphic that is a Guide for Filipino’s on Home Buying Fees and Charges.
You know this but you tend to neglect insurances because it is costly. But, do you know that if insurance too is basic in borrowing? Banks often require fire insurance and mortgage redemption insurance – all in which is essential if the worst case scenario happen. An MRI is a life insurance policy with the bank as the beneficiary in case of the borrower’s untimely death. And don’t take that risk, it is not worth it.
Yes, negotiating for your home loan interest and the cost of the house is possible. It’s just that you are not asking the home loan officer or the Realtor. You should definitely try this and make sure you have plenty of options like the option to walk away when they don’t give in to your reasonable requests.
Not Reading the Terms & Conditions
At iMoney, we’ve always emphasized on the need to read all the fine prints for anything that involves money. This goes for your mortgage loan agreement as well. If you don’t have the capacity to do so, make sure you get the loan officer to point out all the things that matter (such as loan amount, interest rate, installment amount, loan period, margin of finance, lock-in period, early settlement penalty and fees & charges).
The general rule: if it doesn’t appear in your agreement, it doesn’t take effect. Period. So if your home loan shows a lock-in period of 3 years whilst your officer is telling you it’s 1 year, the former wins. All the time.
Taking a mortgage loan right now? Why not check out our mortgage loan comparison table and find one that suits you the most!