Home Loan: Research carefully before 'knocking on the bank's door'

With the development of real estate projects, banking services for real estate loans are also "exploding". However, not everyone understands this credit product well, as well as the risks that may be encountered. Therefore, before deciding to "knock on the door" of the bank to borrow money to buy a house, borrowers should be careful and research carefully.

Are the interest rates really attractive?

Loans with interest rates of only 0% applied for 6 months, 1 year or even 2 years, or preferential interest rates lower than current interest rates; interest and principal paid in installments over a period of up to 10-15 years... are the invitations for home loan products of banks. If only stopping at this information, most borrowers find it quite attractive, especially for many people, banks are considered the only "door" to be able to own a large asset such as a house.

But in reality, the bank's real estate loan products are not really "cheap" as advertised, because the preferential interest rate is only applied for a short period of time, and after that, the borrower will have to pay interest according to the market; that is, including the capital mobilization interest rate plus 3-3.5% of the bank's management and operating costs. The increase in the mobilization interest rate means that the loan interest rate also increases. Therefore, along with carefully researching the real estate project, the borrower needs to consider the time of borrowing, the loan amount, as well as a reasonable interest rate package throughout the loan period.

Borrowers should also consult experts' forecasts on the possibility of interest rate fluctuations in the short and medium term. Although the interest rate level has been maintained quite stable for a long time, the money market is showing signs that it may push interest rates to fluctuate in an upward direction.

According to statistics from the State Bank, in mid-May, the common VND mobilization interest rate was at 0.8 - 1%/year for non-term deposits and deposits with terms of less than 1 month; 4.5 - 5.4%/year (terms from 1 month to less than 6 months); 5.4 - 6.5%/year (from 6 months to less than 12 months); 6.4 - 7.2%/year (over 12 months). Many banks raised long-term mobilization interest rates to 7.8-8%/year.

Although the mobilization interest rate has increased slightly, it is mainly applied to long terms, so the lending interest rate has not changed much. Specifically, for priority sectors, the interest rate is applied at 6-7%/year for short-term loans, 9 to 10%/year for medium and long-term loans. The lending interest rate for normal production and business sectors is 6.8-9%/year (short-term), 9.3-11%/year (medium and long-term).

Interest rate hike forecast

According to VCB Securities Company (VCBS), lending interest rates tend to increase for the rest of the year. This is based on factors that are putting pressure on increasing deposit interest rates that are happening locally at some banks. VCBS believes that recently, many banks have continuously issued deposit certificates with high interest rates to increase capital and meet safety ratios, significantly increasing the pressure on competition for deposits.

In particular, in the second half of 2017, the risk from exchange rates is likely to "heat up" again and the pressure on interest rates will gradually increase. In addition, the pressure of liquidity shortage also forces banks to increase interest rates to attract deposits. Not to mention, the high credit growth rate (up to the end of the first quarter, reaching 4.03% compared to the beginning of the year, significantly higher than the figure of 1.79% in the same period of 2016) is also considered one of the reasons for the growth in demand for mobilization.

If the interest rate increase scenario occurs, the bank's real estate loan products will also be under strong pressure to increase interest rates, directly affecting borrowers. In addition, real estate projects will also be affected, because if they have to borrow at higher interest rates, project investors will be forced to adjust the selling price. Therefore, choosing the time to borrow money from the bank to buy a house is very important, avoiding periods when interest rates are at risk of increasing, leading to an increase in real estate prices, plus the burden of interest that borrowers have to pay.

In fact, the current real estate loan interest rate has increased by about 0.5% per year compared to more than 2 months ago. If calculated from the beginning of the year, real estate loan interest rates have increased by about 1% per year, reaching 12.5 - 13% per year.

Another point that borrowers should note is that the more preferential programs and interest rate promotions the bank offers, the more it will try to compensate for losses later. Therefore, when studying the credit contract, borrowers should pay attention to the base interest rate and margin to calculate the interest rate for the entire loan period.

According to economist Dr. Nguyen Tri Hieu, banks usually lend money to buy real estate in two ways. First, the borrower will pay a fixed amount, such as 10 million VND/month for the entire loan period, without changing. Second, the borrower will pay interest according to the principal balance gradually decreasing until the end of the period. With the second method, the borrower is at risk because the interest rate fluctuates more. Therefore, choosing the method of calculating interest is also quite important before signing the credit contract.

According to Hanoi Moi