The mortgages are terribly cheap, but there are risks now. Mortgages usually have a maturity of 20 years, so don’t expect to pay the bank so little. What should one pay attention to when taking out a home loan?
The risk with today’s loans is high because the APRs of today’s loans are so low that there is really only an upside. Of course, the central bank may lower the base rate even further and lower the cost of retail loans by a factor of one, but this may dwarf any possible increases over the next 20 years.
Worth protecting yourself against interest rate fluctuations
1. Do not borrow too much
2. Take advantage of interest rate subsidies
3. Choose fixed rate loans for several years
4. Save money so we can repay it
What is the appropriate loan amount?
Before you take out a loan, it is worthwhile to look at how much income you have and how much you spend per month, that is, how much you will have to pay off your loan. This is the amount the bank will look into, but you might also want to consider what if someone loses their job or the interest rate changes. If you feel you could pay an even higher 20 percent installment, you probably won’t have a problem paying.
Interest-subsidized loans are always worthwhile
Market loans are cheaper at some banks than interest rate subsidies, but you may want to apply for the latter – we learned from this Peace Bank credit comparison. Although there is no interest rate subsidy on loans below six percent interest rate, we can be protected from overdue charges for 5 years if we choose this facility. This may be especially important for shorter loans of around 10 years, as after the first 5-year interest-subsidized period, you will only have a smaller amount of capital at the bank, so you will have to pay less interest. Or, the interest rate risk is lower already towards the end of the term.
We can fix the interest rate of our loan for several years
Fixed loans are a little more expensive, as the bank takes a greater risk in disbursing it, but it may be worthwhile to opt for a longer-term loan right now (within the interest period, the bank cannot change the interest rate on the loan, even if the central bank base rate changes). For products with a fixed term of three or even five years, the loan fee will certainly not change during this period, and we will be better prepared for future changes. Maybe we can pay it off at the right time.
Let’s save and get it cleaned up
It is almost always worth a prepayment if we can, as interest rates on loans are much higher than deposits, so we can gain more than we can lose. However, it is worth considering some fees as most loans have some upfront costs. In this case, it makes sense to talk about repayment from your own money, as the goal is to avoid high interest rates.
If you prepay for your own savings, the bank may charge a maximum of 1 percent and a mortgage bank 1.5 percent. However, after the first two years, you can have it prepaid once for free, provided that the repayment is not more than half the amount withdrawn. Even if we have less than one million debts and have not been repaid in the previous year, the repayment will be free of charge.
You can start saving for early repayment as soon as you take out a loan. A home savings can be a good tool for this, as the money raised here can be used to pay off a home loan, plus a 30 percent subsidy on every payment.
In conclusion, considering today’s home prices and interest rates on loans, we still consider buying a home a good idea. But current borrowers need to be especially prepared for a significant increase in their installments over the coming years due to rising interest rates. Perhaps as competition intensifies, competition between banks will increase and bank premiums may decline, but the hiels who have just been recruited will not be affected. So it is worth getting ready in time.
If you want to know what to look for when choosing a predictable and affordable home loan,