8 Practical tips when buying a home
Ask the banks these 6 questions
Don’t be shy, and feel free to print this out if it’s useful for you.
Will you be able to pay the loan valuation and legal fees or mortgage insurance upfront?
If not, will the bank include these in your loan package? Many banks will include these costs in your loan package provided they don’t exceed 5% of the initial loan amount.
What is the tenure of your loan?
The maximum duration or ‘tenure’ for a loan is typically 35 years or until you reach 70 years of age, whichever comes first. However, some banks may only allow a maximum of 30 years. Taking a longer tenure reduces your monthly repayment burden but it does increase your interest cost in the long run. Ideally, you want to take a longer loan tenure but have the option of settling the loan early without a penalty.
Is there a lock-in period? How much is the penalty?
Not all loans have lock-in periods. For those that do, typical lock-in periods are 3-5 years. During the lock-in period, you’ll be penalised for settling the loan early. It is best to check with your bank on the terms and conditions of the lock-in period.
After the lock-in period, can you easily make extra payments? Do the extra repayments immediately lead to a reduction in your outstanding loan amount (interest payments)?
Some banks require you to make a special application and get their banks approval. Some will also charge you processing fees.
Is there a monthly fee to maintain your loan account?
This is typically applicable to full flexi loans only.
Can you withdraw (‘redraw’) any early repayments you have made into your loan account? Will there be a withdrawal fee, and how long will the withdrawal process take?
For semi and full flexi loans, you can redraw (withdraw) the excess money you have paid. For semi-flexi loans, unlike full flexi loans, there will usually be a fee. For the processing time of withdrawals, it is best to check with your bank.