My good friend who’s also a colleague asked, ‘if I am almost ready for my second property and getting a mortgage loan can you give me some advice?’. I feel that you need to consider 6 things. However, beyond that, you must decide on item 1 first.
1) Are you serious about property investment? The reason I ask is because you need lots of time. ‘Property Investment? You need lots of time’ Do you already know enough about the property? Are you buying simply because your friend is buying? Decide with sufficient information.
2) If you have decided, viewed and found a property, then think about the type of loan. Traditional term loan or a Flexi Loan. I think these days, majority would go for Flexi Loan but personally I prefer fixed amount per month. I do not normally pay more because I would love to also save for my next property. Note, this is just a personal preference. If you want to save on interest, you should pay more every month.
3) Interest Rate. It can be very different from bank to bank even if the difference is 0.1 – 0.5%. Always call a few bankers instead of one. By doing this, you may be able to get the bank which is giving the best rate at that particular month. I used to prefer banks with more branches but these days I think any bank with your account should be fine. Just TT. Per transaction is just 10 cents.
4) Margin of Financing (How Much the bank would lend you). If this is your third property, it would be a maximum of 70%. Else, you may get 90% but all these depend on the value of the property, your credit rating and the bank themselves. Different banks may have different way to evaluate your loan application.
5) Lock In Period. If your bank loan has a Lock-In period, you cannot finish paying off the loan any earlier or else you may incur a penalty. Nowadays however, there are a lot of banks who would waive the lock-in-period provided you provide sufficient notice. Check before you take.
6) The Bank. It would be wise to choose a bank for which your salary is credited every month. Alternatively, one which is near your office. This would give you the convenience should you need to go to the bank or when you need to TT the payment. I have had bad experience with a certain foreign bank before but my friend said foreign banks are the best. Choice is yours. Everyone has their preference.
If the banker has served you well, it certainly pays to treat him a cup of Starbucks. Be good to everyone because they may share even more good deals with you in future.
written on 21 Feb 2014
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