What Are The Upfront Costs Of Buying A Home?
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
You see the phrase everywhere and hear people talk about them, but what exactly are interest rates?
Borrowing money from a bank isn’t free. A bank that lends you 100,000 pesos makes no profit off you simply paying that amount back. The interest rates are essentially the profit the bank makes off your loan. You could also say that the interest rates are what it costs you to borrow money.
For example: If you borrow 100,000 pesos from the bank and they charge you 5% interest on it over 12 months, that means that you’ll end up paying PHP105,000 total.
Interest rates are important because they dictate how much extra you have to pay on top of the money you’re already borrowing.
You can have a low interest rate for 20 years, or a slightly higher interest rate for 10 years, and still end up paying the same amount. You need to decide how long you want (or need) to pay off the debt in order to make the most of the interest rate on offer. Keep in mind your budget, your estimated annual earnings, and allow for emergencies before deciding how long to have a loan for.
Nearly every bank in the Philippines lists their interest rates on their website, which are “fixed rates” for a certain amount of years. This means that regardless of the economy, disasters, or rate increases, you will pay that rate.
After a fixed rate period ends, you will be on an “adjustable rate”. These rates can change fairly dramatically over the years because they are dictated by the market rate. Therefore, they can increase or decrease depending on inflation, economic stability, governmental changes, or the implementation of new laws.
Likewise, in times of stability, they can stay fairly steady. There is more risk involved with an adjustable rate because you don’t know how much you’ll be paying in the future, however it can also be a benefit because it can be less than the fixed rate the lender offers.
Interest rates can sound complicated at first glance, but they are simple once you understand that it’s just how much you are being charged to get a loan. If you need help comparing interest rates offered by various banks, it can be a good idea to get financial advice from a broker.
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
Borrowing power refers to the amount of money that a bank is willing to lend you. It can also be called your borrowing capacity.
You see the phrase everywhere and hear people talk about them, but what exactly are interest rates?
Your Loan to Value ratio, also known as an ‘LTV’, refers to the percentage of the value of a property a buyer needs to borrow.
Buying your first home is a big milestone. It requires a lot of time, effort, research, paperwork, and most importantly, money.
Borrowing power refers to the amount of money that a bank is willing to lend you. It can also be called your borrowing capacity.
You see the phrase everywhere and hear people talk about them, but what exactly are interest rates?
Your Loan to Value ratio, also known as an ‘LTV’, refers to the percentage of the value of a property a buyer needs to borrow.
*This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. Interest rates displayed are dependent on qualifying for a home loan with your chosen Bank. We cannot guarantee clients will avail the advertised rate.
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