8 things to note when borrowing money from the bank to buy a house

(Baonghean.vn) - You have chosen a house that you like and plan to borrow money to buy it, but are wondering whether you should borrow from a bank? Here are 8 things you need to keep in mind when borrowing from a bank to avoid falling into a disadvantageous situation.

1. You should only borrow up to 50% of the house value.

Before deciding to buy a house, make sure you have a minimum savings of 30% of the value of the house you want to buy, ideally this savings should be equal to 50% of the value of the house.

According to banking consultants, a loan of 50% of the property value is considered the ideal and least stressful loan amount, helping borrowers to easily repay the loan to the bank while also covering other expenses in life. In the case of a loan of more than 50% of the house value, the borrower will have to face the pressure of debt repayment that is always present.

2. Choose a preferential loan program

Borrowing money means you have to pay a certain interest rate offered by the bank. Therefore, finding loan programs with preferential interest rates is very important, because that way you have reduced the burden of debt repayment for yourself.

3. Understand interest rates

When borrowing money from a bank, borrowers must know the rule: capital is fixed but interest rates are often floating.

Currently, there are many banks offering attractive preferential interest rates to borrowers, but these preferential interest rates are usually only applicable for the first 6-12 months. From the 13th month onwards, the interest rate will be adjusted to increase by about 3.5-4% depending on each bank and each borrower. Therefore, before borrowing, you need to carefully check how the interest rate will change for the following years according to the credit contract; if possible, ask the bank staff to clearly advise on the interest costs over the years.

Another factor that needs to be clearly understood before signing a loan contract is whether the bank loan will be calculated based on the decreasing balance or the initial balance.

4. Consider the loan term

In addition to the interest rate, the loan term is also a very important factor that borrowers should know. When you borrow from a bank, usually loans over 5 years have the same interest rate. Therefore, you should choose the longest possible loan term to reduce the monthly principal to the lowest level.

5. Maintain monthly income

Maintaining a stable monthly income is one of the important things before borrowing money from the bank to buy a house. Many financial experts believe that having a stable income will create a solid financial foundation to repay the bank loan (including both principal and interest).

In addition, borrowers should also find ways to increase income from additional sources, thereby ensuring that even if interest rates increase, they can still repay the principal and interest.

6. Self-assessment of payment ability

Before borrowing money, borrowers need to assess their financial capacity to minimize the possibility of default in the future. Plan clearly for the following three possibilities:

Financial capacity (1): This is considered the amount of savings that the borrower has, the monthly income of the borrower and family after deducting all monthly living expenses.

Financial support (2): A portion of capital is supported by relatives to buy a house with interest-free loans or interest rates equal to or lower than bank interest rates.

Ability to repay (3): Borrowers must know exactly how much they will pay each month, and must also keep interest rate fluctuations under control.

If you do the calculation (1) + (2) and get the result (1) + (2) ≥ (3), then buying a house with bank capital is considered feasible.

7. Be careful of floating interest rate "traps"

To avoid falling into the floating interest rate trap, borrowers must estimate that interest rates may increase by up to 30% as well as anticipate some unexpected expenses that may occur. Thus, after deducting monthly household expenses, the remaining amount must ensure 150% of the amount payable to the bank.

For example, if you pay the bank 10 million VND/month, you must have a monthly surplus of 15 million VND to prepare for the situation where the interest rate may suddenly increase.

8. Beware of penalties for early repayment of loans

Normally when taking out a home loan, many customers often pay off their debt before the loan term, as a result, they are often fined by the bank for early payment, the penalty is from 1 - 3% of the amount paid off early.

Once the bank offers a low interest rate, it will be accompanied by a high penalty to compensate for the loss of the initial preferential interest rate. Therefore, if you choose a bank that guarantees and commits to not penalizing early repayment, you will save a significant amount of money.

Ngoc Anh

(Synthetic)