Table of Contents
Most buyers apply for a housing loan for real estate investing. Housing loans, however, don’t shoulder the total amount of the property’s selling price. Banks often offer to pay only a certain percentage of the contract price, and you will have to pay the down payment and other upfront costs, such as the reservation fee. Here are some factors you need to know when paying the down payment on home buying.
Computation of Total Costs Involved
Land developers now include as much information as possible on their property listings. However, it is still best to consult your broker and ask about the fees involved before buying the property. Ask for a rundown of the total expenses, such as the reservation fee, down payment, and monthly amortization.
Some brokers offer flexible payment schemes, but the usual range of a down payment is between 10 to 30% of the total selling price. In cases where you cannot pay the full down payment, you can negotiate with your broker if you can pay spot cash, and depending on your agreement, your broker will spread out the remaining balance for the down payment on the agreed time frame.
Experts advise you must have at least three months’ worth of savings for the monthly down payment amortization. This will give you enough time to save for the next amortization payment. This setup works for in-house financing, where the developer will offer you payment terms without the help of a third-party or financing institution.
However, this is also equivalent to higher mortgage rates since you will only be given five years utmost to settle the remaining balance. This will also vary depending on your chosen property type, i.e., ready-for-occupancy, pre-selling units, etc.
Let’s say you are interested in a house and lot for sale. The usual down payment is 10 to 20 percent of the purchase price. Let’s say the property you want costs Php 5 million. In this case, the down payment will range from Php 500,000 to Php 1 million.
What if you are interested in a condo for sale? Most lenders require a downpayment of 20 to 30 percent of the total condo purchase price. Assuming the condo you want costs Php 5 million, your down payment will range from Php 1 million to Php 1.5 million.
A Housing Loan With A Down Payment
A housing loan with a down payment will have a higher chance of being approved by the lender. This indicates that the buyer/borrower is in good financial standing and can make solid payments for the loan in the future.
Additionally, if you have a down payment, you will only require a smaller loan than if you were to borrow the entire contract price of the house. Due to the smaller loan amount and shorter loan duration, the compound interest will be lower, allowing you to save more money.
You can check out the free mortgage calculators offered by banks and real estate websites to see whether your present financial situation will allow you to purchase the house you want in order to ensure that your housing loan will be granted.
Saving Tips for Your Down Payment
If you plan to purchase a home by shouldering the down payment, you can apply the following savings tips to prepare you financially.
Create a budget and spend wisely
This means prioritizing your needs first by spending wisely and cutting back on unnecessary expenses such as splurging on wants. You might also need to realign your financial goals at this point, placing your dream home at the top of your list. Once you have the new budget in place, stick to it, and as much as possible, refrain from making any purchases unless it is an emergency.
Earn extra cash from side hustles
You may do so if you still have the time to earn extra money by freelancing or doing part-time work. It can be from any hobby you have, or it can be an online business. Ask your friends, colleagues, and family for any opportunity they know to earn an extra income. You can also sell some of the items at home that you don’t use anymore but are still in good condition. If you have a car, you may save up on gas by registering your vehicle with Grab and offering your driving services to commuters when going to work and coming home.
Avoid getting into debt
Credit cards can easily trap you in piles of debt. Compounded interest will eat a huge chunk off of your savings, and for as long as you’re paying your credit card debt, it will take some time before you can start saving for your down payment. If using credit cards has been a part of your lifestyle, you might want to consider shifting to paper bills instead when paying for all your purchases.
Before purchasing the property of your dreams, investigate a few choices regarding the down payment required for real estate investing and decide which one works for you. The more money you put aside for the down payment, the less you’ll have to pay in interest on the balance due, and the sooner you’ll be able to move into your new house with your family debt-free.
Are you ready to be a homeowner? Browse through Lamudi’s properties for sale to find the one that suits you best.
For more tips on the Philippine real estate market, check out other related journals on Lamudi here.
