Use these practical tips to help you enjoy savings when getting a mortgage loan.
Getting a mortgage or home loan entails a lot of research and questions.
After all, it’s one of life’s biggest decisions because the loan amount and
the terms that you will get will dictate the rest of your financial
choices.
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7 Practical Tips On How to Enjoy Savings When Getting a Mortgage Loan
On the other hand, getting a mortgage loan is a decision that is worth
celebrating because you are finally taking the first step in bringing your
dream home to reality. While you are excited, it’s also good to delve deep
into the essential facts about mortgage loans and how you can eventually enjoy
savings even when you are paying your monthly amortization.
The factors that determine the mortgage loan price
If it’s your first time to apply for a mortgage loan, you will definitely have
a lot of questions going on in your head.
To make things simple, you just have to keep in mind four key concepts
involved in determining the price of a mortgage loan: the loan amount, down
payment amount, interest rates, and loan terms.
Let’s define them quickly:
1. Loan amount
The loan amount is the total sum that you are interested to borrow. It follows
that the bigger the amount that you are borrowing, the bigger your monthly
amortization will be.
2. Down payment
The down payment, or what is termed by some financial institutions as the
deposit, is the initial amount that you have to pay to the lender (bank,
credit union or cooperative). Keep in mind that the bigger the down payment,
the more that you can negotiate for lower interest rates.
3. Interest rates
The interest rates are the percentage charged by the lender against the total
amount that you borrowed. For mortgage loans, it would also help to know if
it’s add-on interest rate (rate applied to total amount then divided by the
total term), nominal rate (the disclosed interest rate on which monthly loan
payments are calculated, again, this is dictated by the length of the loan).
The lower the interest rates, the lesser the monthly amount that you have to
pay.
4. Loan term
The loan term is the length of payment of the housing loan, usually stated in
the number of months. The shorter the loan term, the lower the interest
charges.
These four factors will eventually dictate your monthly amortization or the
amount that you have to pay each month.
The monthly amortization versus your monthly income will give you an idea if
you can afford the mortgage loan or not. Likewise, it will also tell where you
need to adjust in terms of your finances (i.e. expenses that you can forego in
favor of getting a home loan) if you do decide to go ahead with the mortgage
loan.
Lastly, remember that you should maintain a good credit history because will
determine your capacity to get a mortgage loan or any other type of loan in
the future. If you get a good credit score, chances are financial institutions
will grant you a loan because of your credit trustworthiness.
The different uses of housing loans
When we think of getting a housing loan, we usually picture a house and lot.
Yes, you can use a mortgage loan to buy a house and lot but it can also be
used for the following purposes:
- Purchase of a lot only
- Purchase of a condominium unit only
- House construction
- Home renovation
You can even get a credit line for renovations and refinancing using your home
as collateral.
How to save up when getting a mortgage loan
Is it possible to get savings even when you are borrowing money for your
house? Yes, it is! Here are several ways to enjoy savings on your mortgage
loan:
1. Buy a house when real estate prices are down
Buying a property when the market price is low is perhaps the most
straightforward advice that you can get on how to save up on your mortgage
loan. If the market price is down, that means that the amount that you have to
borrow need not be too high.
The COVID-19 pandemic has caused real estate prices to contract. According to
a report published by the
Bangko Sentral ng Pilipinas, real estate prices has declined during the latter part of 2020. If you have
the means, this is the best time to apply for a mortgage loan and buy a house.
2. Get a loan when interest rates are down
This is another practical suggestion to enjoy savings on you housing loan:
borrow when interest rates are down. Simply put, when interest rates are low,
your monthly amortization will also be lower.
3. Go for shorter terms
As I’ve mentioned above, the shorter the loan term, the lower the interest
rates. That’s because a shorter term signifies that you are serious in paying
off your obligation promptly.
4. Use a mortgage calculator
Using a
mortgage calculator would allow you to compute for your monthly amortization just by
providing the total price of the house, the down payment or deposit amount,
the total mortgage amount, the interest rates, and the loan terms. Once you
have computed the total monthly payment, you can make a decision whether you
can afford the loan or not.
The mortgage calculator may not directly provide you with savings but it can
greatly help you manage your finances. With a mortgage calculator, you
significantly reduce the risk of you entering into a contract that may be
burdensome to you in the long-term.
5. Take advantage of rebates
Some banks offer rebates or cash back if you make advance monthly payments as
well as excess amortizations. It’s good to take advantage of this setup
because it’s straight credit to your account.
6. Pay via automatic debit arrangement
Other banks also give a premium for automatic debit arrangements. If you are
certain that you would have a steady flow of income into your savings account,
you can set this up for an automatic debit arrangement to save you the hassle of
remembering your monthly dues.
What’s more, some banks can give you preferential rates when you go for this
type of arrangement because that means that you are guaranteeing them of fixed
payments.
7. Choose locked-in interest rates
One other important aspect in mortgage loans that you have to remember is the
repricing of interest rates. Yes, rates may change or get repriced versus the
quoted interest rates without prior notice. This means that, depending on the
market condition, it may go up or go down.
In the end, it can affect your monthly amortization. Inquire from you bank if
you have the option to lock your interest rates, provided that you are
comfortable with this arrangement.
Epilogue
These are some practical tips that you can use to enjoy savings on your
mortgage loan. This list is not exhaustive but this will give you a fairly
good idea on how to make wise choices, especially for first time mortgage loan
borrowers.
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I'm so thankful to have found this. We are in the process of buying a home and need all the savings tips!
ReplyDeleteThank you for this pointers. I haven't tried getting mortgage loans but i am planning to get a house loan soon. It's a big decision for me so i'm trying to save money to prepare for it and i'm making sure i am ready for it hehe
ReplyDeleteThank you for sharing
Mortgage loan such a headache to maintain. Thanks for sharing some valuable tips with us.
ReplyDeleteSuch a great and helpful tips. This is so perfect to those who are planning to have a mortgage loan. Thank you!
ReplyDeleteAgree that it wise to invest in real estate when the prices are low. You have so many options by then and real property consultants will "fight" for the best deal for you.
ReplyDeleteThese are good tips . We haven't needed a new mortgage for a while but I will keep this in mind for any vacation house in the future!
ReplyDeleteAmazing tips for those who need it! I like the way you break down your topic. I think it relieves the stress associated with mortgages when you make it accessible like this.
ReplyDeleteGreat tips! I'm waiting for the real estate prices to go down. In my area prices have gone up by 200% in the last 10 years/
ReplyDeleteGreat tips! It's really wise to invest on real estate while early. It's a good security in the future.
ReplyDeleteFocusing when it's down is good idea because it would save you tons of money. Great tips! Thank you for sharing!
ReplyDeleteFransic - https://www.querianson.com
I think it would be great to have the shorter term loan. 30 years is just too long!
ReplyDeleteRight timing! I'm in the middle of making a decision whether I'm buying, or rather starting a mortgage loan. Thanks for such an informative article!
ReplyDeleteWe're due to renew next year so this is super helpful! We'll hopefully cut it down by 10 years if we invest enough!
ReplyDeleteVery informative and helpful po. I like that you gave tips and detailed explanation.
ReplyDeleteThank you for sharing complete details po about mortagage loan very helpful po lalo na sa katulad ko wala gaano idea🤗.
ReplyDeleteOne strategy I used to get the lowest mortgage rate was to go back and forth between a mortgage broker and my bank's mortgage rep. I would tell the mortgage broker what rate my bank rep was offering and she would offer a lower rate, then I would go back to my bank and advise what the mortgage broker was offering and the bank rep would offer an even lower rate.
ReplyDeleteBuying a house can be such a headache, so these tips are great! Seems house prices keep increasing round us though! Including our house which is nice!
ReplyDeleteWe are currently in the process of speaking to a mortgage broker about our options with a view to buying a house this year, this is a really helpful and informative post.
ReplyDeleteInteresting read and logical tips but quite frankly getting loans from banks is a scary thing.
ReplyDeleteThis seems like very useful advice for those in this position! I'm not in that position, but can still appreciate what you're sharing. :)
ReplyDeleteThese tips come at the right time as I'm gettin a new mortgage loan, thank you!!
ReplyDeleteThese are great tips from what I've heard! Whilst it will be a long while before I'm anywhere near able to buy a house, it's always good to keep tips and tricks up my sleeve for when I am ready to take that step!
ReplyDeleteThank you for sharing all this valuable information that will help many people plan their mortgage loan. Great tips indeed.
ReplyDeleteI must say that the tips are perfect with detailed explanation. Mortgage loan sounds good!
ReplyDelete