In recent times, the wide and easy public accessibility afforded to home loan options has made owning or constructing a personal residence a feasible goal for many people. In addition to traditional home finance loans offered by banks, the government and certain private institutions also provide similar opportunities to people hoping to make good on their residential construction/ownership pursuits.
On the Renewed Accessibility of Home Loan Options
Generally speaking, most individuals hailing from the country’s middle-class demographic (and up) can nowadays easily avail a diversified collection of home loan options. For example, banks offer house building loans if you already own a plot, home extension loans if you have a constructed house, and home improvement loans if you’re interested in following up on a long-planned renovation gig.
Additionally, the trend of acquiring a mortgage is also gradually taking root in the country. This house financing route becomes practicable when you’ve already selected a certain house to buy and need the required funds to complete your purchase. The property in this situation is termed the ‘collateral’ – enabling the mortgage to be classed as a secured loan (when considered from the banking standpoint).
In Pakistan, there is no shortage of avenues for acquiring financial assistance for constructing or buying a home. One notable example is that of the Escorts Investment Bank (EIB), an institution that not only facilitates its clients financially, it also provides educational material for making sense of its offered monetary solutions. Additionally, the experts at EIB provide advisory services regarding financial planning tailored narrowly to their clients’ specific requirements.
Despite the many conveniences offered by modern house financial loans, however, they are not very easy to acquire. In contrast, it is quite natural to get carried away when dreaming about owning a personal home; so it’s important to keep your feet firmly planted on the ground at all times when you’re engaged with this venture.
Additionally, it is not always possible to afford everything that you really want to go into your house – even if you are eligible for the loan itself.
This blog, luckily, is your guiding resource to help you steer a clear path through this proverbial, new-age maze-of-sorts, and to score a loan deal that is workable on all counts.
Determining the Types of Home Loans that You can Afford
Taking your level of affordability into consideration is essential when acquiring a bank loan for your prospective house. You don’t want to end up getting a loan you can’t pay back.
Many people simply consider the upfront price of the property or the construction when determining which home finance loan they can afford. This is the wrong way to go about this critical process. The expenses of constructing or buying a house go beyond just the apparent costs. Many adjacent costs have to be considered as well.
Therefore, before you make one of the most important financial decisions of your life, learn what you can to determine how much you can actually afford when considering a bank loan for a house.
Some Basic Considerations for Checking your Eligibility
1. ‘Eligibility’ does not always equate with ‘affordability’
Sometimes people are surprised that a bank approved them for a certain amount of a house building loan. This is a pleasing situation but you must remember that eligibility does not necessarily mean affordability.
The fact remains that banks are business organisations looking to make profits from their clients. So a bank may offer you the maximum amount for a loan, which will mean a higher interest amount from your side.
This is why it is important to know what you can really afford and whether you might have any alternate solutions to choose from instead.
At EIB, you will have access to expert financial education and advice in order to plan according to the type of house you require, and the amount you can afford to pay.
2. Calculate your total expenses
It is not just the expense of buying or constructing a house you need to consider. There are several side expenditures. For example, you will have to pay a down payment when acquiring a house building loan or mortgage. Similarly, if you bought a house with the loan money, then you may need additional funds to renovate, upgrade, or furnish it. Meanwhile, a construction process from start to end can bring several unforeseen costs.
Therefore, your approved loan should be enough to meet all such expenses, and not just the upfront costs.
3. Debts and future expenses
An active lifestyle means that you are responsible for paying certain monthly debts. These may include utility bills, car fuel costs, credit card bills, etc. Similarly, it is possible for some unforeseen expenses to arise in the future. For example, in most cases, people who are about to start a family seek a new home. However, having children definitely leads to more expenses. So you must keep all these situations in mind before determining the amount you can afford for home finance.
Similarly, it is possible for some unforeseen expenses to arise in the future. For example, in most cases, people who are about to start a family seek a new home. However, having children definitely leads to more expenses. So you must keep all these situations in mind before determining the amount you can afford for home finance.
4. Are you mentally prepared?
This might seem like a trivial thing to think about but not everybody is comfortable with giving away a significant portion of their monthly income for loan repayments. The idea is not to rush with homeownership. It is not an easy decision. It does not hurt to delay it for when you can actually afford to do so, or have some money saved up to cover unanticipated costs.
If you own a plot and think you are ready to develop it into an actual home, then do learn about the house finance options available at EIB. The bank is currently offering home construction loans for pursuing constructions on a plot, completing construction, and conducting house expansion spells.