First time home buyers, most home buyers do not know much about loans and repayment methods. If you take out a loan, how long is appropriate? The shorter the time, the better? What kind of bank loan to choose? How to loan more money ......
Types of loans and differences
Loan to buy a house, can use the provident fund loan to buy is the best, provident fund policy in recent years is also in the continuous relaxation, to buy a house, rent a house can be used. The loan can also be a mixture of provident fund and commercial loans. Now more than 5 years, the CPF loan interest rate is now 3.25%, the commercial loan is also in 4.9%, with commercial loan interest rate different cities around there will be a small discount.
1. Provident fund loans - lower interest rates, but there are limitations on the amount
Housing Provident Fund Loans: For residents who have participated in the payment of housing provident fund, loans to purchase a home, should be preferred housing Provident Fund low-interest loans.
Housing Provident Fund loans have a policy subsidy nature, the loan interest rate is very low, not only lower than the same period of commercial bank loan interest rates (only half of the commercial bank mortgage interest rate), but also lower than the same period of commercial bank deposit interest rates, that is to say, in the housing provident fund mortgage interest rate and the bank deposit interest rate between the existence of a spread. At the same time, the charges for housing fund loans are halved when dealing with related procedures such as mortgages and insurance.
2. Commercial loans - high quota but high interest rates
As long as the balance of deposits with the lending bank is not less than 20% of the amount of funds needed to purchase the home and this is used as the down payment for the home, and if there are assets recognized by the lending bank as a If you have an asset recognized by the lending bank as a mortgage or pledge, or if you have a unit or individual with sufficient solvency to act as a guarantor to repay the principal and interest of the loan and to assume joint and several liability, then you can apply to use the bank's mortgage loan.
3. Combination Loan - Moderate Interest Rate, Large Loan Amount
When the housing provident fund loan can not meet the demand for housing, the borrower can apply for a combination of loans, i.e., in the housing provident fund personal housing loan at the same time in the designated bank for part of the commercial The loan is a combination of a personal housing loan from a housing fund and a commercial loan from a designated bank. Combination loan interest rate is more moderate, the loan amount is larger, so more by the lenders to choose.
What are the repayment options?
1. Equal Principal Repayment
Amortize the principal amount into each month and pay the interest between the last transaction date and the current repayment date.
Advantages:
Lower overall interest expense; Monthly payments will decrease over time.Disadvantages:
The burden of repayment is heavier upfront, and the first installment in particular can be very stressful.
Applicable people: people with higher incomes, such as corporate executives, gold-collar workers and returnees.
2. Equal Principal and Interest Repayment
Add the total principal amount of the mortgage loan to the total amount of interest, and then spread it evenly over each month of the repayment period.
Advantages:
The borrower pays a fixed amount back to the bank each month; the interest rate decreases each month.Disadvantages:
Higher overall interest expenses.
Applicable people: Stable income from work, employees of national enterprises and institutions, etc.
Loans to save money Q&A
Q: If the loan, how long is the loan appropriate, to repay early?
A: First of all, if you can borrow money from the bank, it is still more cost-effective. Because China actually has a long history of high inflation and low interest rates, and even a long history of negative interest rates. You borrowed the bank's money, in fact, is equal to earn. Also because of this reason of negative interest rates, so equal principal and interest repayment is better than equal principal repayment. It's true that you end up paying more interest back to the bank, but it's less stressful in the beginning. A lot of people who buy a house start out with debt, and a lot of people start out with a lot of stress.
Q: Does a CPF loan necessarily save more money than a commercial loan?
A: Generally speaking, CPF loans have somewhat lower interest rates than commercial loans, and most people feel that CPF saves more money than commercial loans.
In fact, commercial loans and provident fund loans are different in terms of insurance premiums, for commercial loans, as long as it is not a commercial property or a residential property with too many years, the bank will not generally require the lender to buy insurance, if it is a provident fund loan, to buy insurance is generally unavoidable, and the premiums are generally for the amount of the loan × the number of years of the loan × 0.02%, the two offset, the provident fund loan The advantage of the CPF loan is even smaller.
So if the loan amount is small, choosing a CPF loan may not be more cost-effective.
After reading these points, for the loan problem, I believe that the smart buyers are "like a finger in the pie", quickly collect the strategy to buy a house to go! In addition, be sure to pay attention to their own personal credit record, if there are problems with credit, the loan will also be a problem.
(The above answer was posted on 2016-11-08, the current relevant home purchase policy please prevail)
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