Every day there are people just like you and me made mistakes in their home loan. By acquainting yourself with “5 common housing loan mistakes to avoid” article, you can save thousands on your housing loan. Read on so you can avoid these pitfalls.
APPLYING 1 BANK AND THAT’S IT
Banks love if you can be extremely loyal to them. Some typical customer that have the home loan, car loan, credit card with one bank and will continue to go back to the same bank without knowing that the bank does not have mercy and will take every chance they have to earn more money.
Example, Andrew has a car loan, credit card and personal loan with ABC bank. Since now Andrew is buying a new house, he need a home loan and Decided to go back to ABC bank, he is comfortable with ABC bank and has so many facilities for them. In the same time, Andrew feels since he is a loyalty customer to the bank, he should get proper treatment, perhaps a better interest rate.
However, what Andrew do not know is bank will have different thinking. Bank nature is to generate profit. Apparently, the bank will think of to maximise their profit.
Well, the truth is for the individual bank, either you are their customer or not. They are offering the same to you. It makes no different.
Question, why you want to continue to be loyal? Why not explore more and get cheaper interest rates?
However, there are a small number of banks that give slightly better for their customer too. For you to know, you just have to apply more application, do not stick with only one bank.
Submission to one bank only is too cliché, give yourself more option and chances to view more offer.
UNSTEADY PROPERTY VALUATION
If you are buying completed property, as you know that property valuation is compulsory to all the bank.
During submission of home loan, bank officer will have verbally check the property valuation and submit to the underwriter for approval.
After approval, the bank’s letter offer will be sent to the customer for acceptance. Let’s said; you accepted the offer. And happily sign the Sales and Purchase Agreement.
Suddenly, when valuer site visits the property. The property value drop. What should you do?
Firstly, you can’t cancel the purchased because you already sign Sales and Purchase Agreement. If you do, you will be penalised by the seller. Besides, you already spend 10% to pay the seller and SPA lawyer fees already paid.
This show how crucial is the property valuation. While, there are ways to avoid such issue.
At the early stage, during application of housing loan, let said you have applied five banks and the property purchase price is RM500,0000.
Bank A: Property valuation RM500,000
Bank B: Property valuation RM480,000
Bank C: Property valuation RM470,000
Bank D: Property valuation RM480,000
Bank E: Property valuation RM460,000
Bank A is the only one can get the value and other banks unable to get, this shows that the property price is slightly higher than the market price.
If you are going to accept with Bank A, you should know that there are changes the property value will fall, and you have to be prepared to top up the different.
Alternatively, you can suggest the bank to ask the panel valuer to visit the property first before signing the letter offer, and this may cause you minimal fees ranging RM200 to RM500 upfront.
If you do not have any extra cash, we do not encourage to proceed to purchase the property. You might at risk losing 10% deposit and SPA lawyer fees. It is wise not to proceed ahead.
READ AND UNDERSTAND YOUR LETTER OFFER
Yes, read your letter offer is not enough. You must understand the terms and conditions as well.
Always know the additional fees incurred, late payment interest rates, ceiling rate for Islamic loan, instalment amount, daily rest or monthly rest facilities, etc
The general rule, if it doesn’t appear in your agreement, it doesn’t take effect or apply to you. All the details information on your facilities lie on your letter offer, not loan agreement. The loan agreement is a standard bank loan documents, and its will start effect if customer stop making payment to the bank.
UNDERSTAND LOCKIN PERIOD
Lock in period should be very straightforward terms in the letter offer. However, the bank can be very tricky at times when given out the lock in period and percentage charge for a penalty.
3% on original loan amount effective from 3 years of 1st disbursement.
3% on original loan amount effective from 3 years of full disbursement.
The key point here is “1st Disbursement” & ” Full Disbursement”.
Well, for sub sale and refinancing cases both terms might have differences in few months period. However, for under construction case, this will be an enormous impact.
Under construction cases might need 3-4 years to have full disbursement. For example, if 1st disbursement happens in the year 2014. And full disbursement occurs in the year 2017. The penalty period started to calculate in the year 2017 + 3 years. Indirectly, it means you are serving three years + 3 years penalty lock in which does not sound fair at all to the customer. But, do the bank officer tell you this?
BEWARE OF HIDDEN FEES
In bank letter offer will typically state every fee that available. Normally, the bank will have RM200 processing fees which sometimes can be waived and at time not.
Or withdrawal fees amounting of RM25-RM50 that can waive for certain banks or account opening fees of RM200 for every account.
For all the full flexi product there will be a maintenance fee of RM10 monthly. However, you can opt for a semi-Flexi home loan to avoid such fee imposed.
Another pointer is to make sure the loan well finances your lawyer fees for loan documentation. For the selected bank, the finance amount might not be sufficient, and the customer will need to top up later.
Most people can’t afford to make home loan mistakes as they could cost ten thousands of dollars. If you’re one of those people, make the effort and pay attention to the details of home loan packages, this is unlike any other purchase or loan with which you’ve ever dealt, so avoid common mistakes to ensure the process goes smoothly.