Investing in property, whether for business or leisure, is one of the most significant investments that you’ll ever make, and with it will come one of the largest debts you’ll likely come across. For this reason, you need to know exactly what you’re signing up for. Although choosing a mortgage with the best interest rate is an excellent starting point, numerous factors impact your mortgage cost. Whether you’re planning to move across the world for a better way of life or start a business abroad, you need to understand how to compare mortgages successfully. That’s where we come in and provide six essential things you need to consider when comparing your mortgage.
Type of Mortgage
Mortgages come in a variety of different versions, and which one you get will depend largely on your financial health. The most common loans are conventional loans that are backed by banks and private lenders. There are also government-backed loans that are designed to help young people take their first step onto the property ladder, as well as help low-income buyers in certain situations. Government-backed loans tend to have lower requirements and no down-payments because they are designed to help people out. Further, there are fixed and adjustable mortgages – the former guarantees a predictable monthly payment whereas the latter is subject to periodic changes.
As mentioned previously, the majority of mortgage rates are based on personal financial health and credit report. The better your credit score is the better the rates will be. To avoid disappointment and find out whether you will be accepted for a mortgage in advance, apply for an in principle approval with PropertyGuru. They use your details and provide you with information on which banks would be the best option for you. Once you’ve been approved, you can start to find a property in Singapore or Malaysia. In principle approval is a process whereby the bank assesses the financial health of a borrower and decides whether they will approve the mortgage. Having an in principle approval does not trigger any money-changing hands, it simply means that when the time comes you have a guarantee of approval – providing all documents check out and circumstances haven’t changed.
Once you’ve found your ideal lender based on the best interest rates, you need to look into what other costs there will be. When you pay a mortgage, you need to consider broker fees, discount points, loan origination fees, and other charges you may face. This is where understanding the APR comes helpful. The APR is the total amount of the loan that you’ll pay per month and is usually presented as a percentage. By understanding the APR, you are relying on more than just the interest rate and will therefore be strengthening your comparison.
If your down payment measures up to less than 20% of your total mortgage, you will need to pay Private Mortgage Insurance (PMI). You must find out how much PMI you will be eligible to pay and add this to your monthly mortgage cost to get a truer representation.
The age-old sales tactic of negotiation can be extremely helpful in getting you the best price for your property investment. Once you’ve got your prices completely worked out you will have a preference on which lender you want to pledge allegiance to. However, you may want to change a term that is cheaper on a different loan. If this is the case, approach your preferred lender and ask if they will match or beat the competitor’s terms – just be sure to obtain a written lock-in letter so you have evidence of any agreements you made.
Mortgage points are complicated to understand but can be a great help when it comes to bagging the best mortgage deals. For reference, one mortgage point is equal to 1% of the overall mortgage. So, if you have $250,000 the point will be worth $2500. Points are pre-paid interest on a loan, which means your monthly payments will be reduced. As a rule, lenders allow buyers to acquire up to four discount points. If you are only staying in your home for a short time, it isn’t worth investing in points because it would end up costing you more. However, if you plan on staying long-term, you can end up saving considerable amounts on your monthly payments.
Applying for a mortgage and buying a house is stressful. Knowing your way around the system and being able to find the best mortgage possible is essential. Remember to look deeper than a lender’s interest rates as there are usually background costs to consider. Once you’ve completely compared mortgages, make sure you negotiate the price before you lock in for the chance of a final discount.