A real estate is a good investment in the long run. Whether you buy it for housing or for rent. If you do not have enough cash to buy a home, you should definitely take out a loan. Before choosing a home loan, it’s a good idea to look closely at the banking market and select the most favorable bank and loan structure. You can inquire personally by going through the branches or you can also check out our website with the Bank home loan calculator, where you can choose from the special offers of our banking partners. Some banks may even give you an interest discount, along with the already low mortgage rates, when you apply online. Here are some important things you should know about home loans.
What You Need to Know About Home Loans – Key Features of Home Loans:
- it can only be used for residential purposes, as opposed to free use loans
- it requires real estate collateral, ie a mortgage
- home loans have the lowest interest rates at present
- the longest term loan, up to 20-35 years
- countless state discounts
What You Need to Know About Home Loans – How Much Can a Loan Amount?
Before you take out a home loan, it’s a good idea to make a pre-credit assessment so you can find out whether you are eligible for the loan before submitting your loan application. It differs from the final credit assessment in that at that time the real estate collateral is not examined, ie no valuation is done, only income and household data are viewed. When the contract of sale is concluded, the deposit must also be delivered. If there is no prior credit assessment and it becomes apparent later that you will not be able to obtain credit during the bank evaluation, you will lose the deposit along with other additional costs. The result of the creditworthiness test shall be the subject of a 3-6 month pre-assessment certificate, in which the credit institution shall certify the amount of credit it is authorized to raise.
The value of the collateral established by the appraiser is what the bank considers as the value of the property. Based on this, you give the% loan included in the loan product, taking into account the state’s law that no more than 80% of the real estate value can be granted. Valuation is greatly influenced by the location and type of the property.
What You Need to Know About Home Loans – How Much Can a Installment?
According to the regulations, up to 50% of the net income can be used for loan repayments below 400 thousand HUF, and above 60%. However, the rules of banks take this more strictly, usually only 35-40% of income can be charged with loan repayments. When determining the amount of a loan, the bank will keep in mind whether you have other loans or what other expenses.
However, it is up to you to decide how much installment will fit into your monthly expenses. You need to think about your spending habits and make sure you can repay your loan even if you lose money. Therefore, it is a good idea to build up some reserves, which can be used to pay the repayment even in such cases, and in such cases the credit insurance can provide a solution.
In the case of home loans, banks make the annuity repayment available, which means that the installment is the same until the end of the term. This way, you can calculate exactly this amount until your home loan expires. In the case of an annuity scheme, in the first period most of the repayment goes to interest, but after that the outstanding debt begins to decrease, thus the repayment rate of the principal increases.
With low interest rates on loans these days, it is expected that they will rise in the next 10 to 20 years. If you decide on a floating rate loan, you will have to bear in mind that due to rising interest rates, your installment will also be higher. However, if you choose a fixed rate loan, the interest rate risk can be reduced because it has the same installment until the end of the term.