Home Loans

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Financing a home loan is one of the biggest decisions you will ever make in your life time. Although this can be confusing and complicated it is important to understand what to expect in the future before signing on the dotted line. Signing a loan agreement without knowing how much you are paying in interest and fees can be devastating for your future, thus it is important that you educate yourself to avoid the common consequences and also avoid falling victim to predatory lending practices.

Finding the best loan is no different than making any other purchase. Be a smart shopper! Talk with a number of different banks. Compare their offers. Ask questions and do not let anyone pressure you into making a deal that you do not feel comfortable with.

It is of utmost importance that you choose a home loan that best fits your personal needs and wants. This may depend on various factors, such as:

  • Your current financial picture

  • For how long do you intend to keep the house

  • How you expect your finances to change in the future

  • Can you adjust if the payments in the future change

The best way to find the "right" answer is to discuss your finances and plans with your bank

There are various types of mortgages available on the market. Choosing the wrong loan programme may damage your financial future. The following are some of the mortgages which you can find on the market:

  • Fixed-Rated Mortgage: A mortgage on which the interest rate is set for the term of the loan, regardless of future interest rate fluctuations. This makes payments precisely predictable, but it’s not always the cheapest alternative.  Fixed rates are offered for predetermined years, for example - for 3 years, 5 years or for 7 years. 

  • Variable Rate Mortgage: A mortgage in which the interest rate may vary and is adjusted periodically based on a pre-selected index. Sometimes known as a floating rate mortgage or adjustable rate mortgage. These types of loans can be cheaper initially, but can be unpredictable.

Knowing the amount of the monthly payment or the interest rate is not enough. Be sure to shop around and get information about potential home loans from several lenders and find out all of the costs involved with a loan. When comparing loans, make sure you are reviewing the same information in each loan such as : loan amount, type of loan, duration of the loan, monthly payment, penalties, annual percentage rate (APR) and other important features. Comparing the APR can give you a clear picture of the different payments each loan requires. This is because the APR takes into account not only the interest rate but also fees(also of a legal dimension), and certain other credit charges that you may be required to pay, expressed as a yearly rate. This will tell you the cost of what you are borrowing and will allow you to compare the costs of one loan to another. So make sure that you ask about the APR rate of each loan programme. Make sure that your loan agreements are put in writing and never accept verbal promises as agreements.

When shopping around you will notice that various loans offer different rates. The following are some tips that you need to take into consideration when different rates are offered:

  • Ask each lender and broker for a list of their current mortgage interest rates and whether the rates being quoted are the lowest for that day or week

  • Ask whether the rate is fixed or variable. Keep in mind that when interest rates for adjustable-rate loans go up, so will your monthly payment.

  • If the rate quoted is for an adjustable-rate loan, ask how your rates and payments will vary.

  • Find out how frequently your rate can adjust and how much it can change at each adjustment.

Home loan programmes have several fees which may differ from one another. Make sure that you know what the amount of the fees and what they are charged for. The following are some guidelines that you need to follow, so to make sure that you are charged fairly:

  • Ask for an estimate of the fees when you apply for a mortgage loan.

  • Ask what each fee covers. Several items may be lumped into one fee.

  • Ask for an explanation of any fee you do not understand.

  • Ask to see invoices if you feel you are paying too much.

We suggest that you access our database of fees and tariffs for loans and advances before you start shopping around. The bank which best suits your purposes might not be the cheapest - in terms of its fees and charges.

Further information about home and personal loans is available here.



Last updated: Sep 07, 2016