Can I get a mortgage today?

We are witnessing challenging times and the housing market has been at the centre of the storm. As a result we are going to see more prudent lending standards across the world and home lenders will now have to meet more stringent requirements in order to procure home loans.

Don’t let this deter you. Buying a home is always a sound investment for your future; however you must clearly understand that a mortgage is a financial commitment over a very long period of time and for many of us the only way to a home. Therefore choosing the right mortgage and getting one approved is one of the most important tasks we have to go through.

Most homebuyers in the region get a home loan to help them close the gap between the deposit they have for a down payment and the purchase price of the home that they wish to buy. Note that in today’s environment this gap is now bigger as most home lenders have reduced their loan-to-value ratios.

So ensure that you have a sufficient cash deposit as well as look at lowering your debt load against your income before you look to buy a house. This will make your application more attractive to lenders who will be willing to offer you a mortgage because you are not overleveraged.

Shopping around

As a homebuyer you must shop around to look for the best deal. Clearly, the goal is to find the most competitive interest rate. You should also pay special attention to the terms of your finance. Take time to know the terminology, types of mortgages being offered and how these options fit with your financial plans. Know clearly how much you need to borrow and the maximum monthly payment you can afford. If you feel unsure about your financial situation or mortgage needs, seek advice and assistance from your mortgage adviser.

Good work, if you have found a great home loan. Now take the time to consider the penalty clauses of your mortgage agreement which you would pay if you exit your loan early, make early payments or miss payments. The cheapest home loans can come with strings attached, particularly those with fixed, discounted or capped rates. So, the headline rate may look attractive, but you could pay a hefty fine for settling your loan early.

Home buyers should be aware that practices between developers, banks /finance companies and real estate agents do differ, and this should be taken into account when buying their new home.

Dealing with financial distress

A number of external factors and circumstances can lead to a home owner suffering financial hardship and this is where your choice of financier will make the difference. If you find yourself in difficulty, speak to your financier as soon as possible and work together to consider the available options.

A number of good finance companies offer the facilities of payment holidays, reduced mortgage payments for a time, or the option of refinancing over a longer time period to reduce monthly payments. The key is to inform the mortgage company as soon as you become aware of this situation, and work with them to find a solution.

Should I get insurance

Having a mortgage is a big responsibility and by ensuring that the loan and property are adequately insured is critical, and gives you peace of mind. Mortgage insurance is essential if you have a partner and/or dependent children. For a small additional premium both the property and the owners can be protected in event of any unfortunate circumstances occurring.

To insure related buildings or contents, it is important that a professional valuation be undertaken to ensure that the correct building insurance amount is taken. This will ensure that should something happen to the building, person, or people responsible for paying the mortgage loan, the family would be protected.

Top ten tips to consider when seeking a mortgage facility:

  • What is the timescale that has been agreed to purchase the property, and does this match the timescales of the financier.
     
  • Is the purchase price realistic for the area you are buying, and time you are buying.
     
  • Which companies are offering finance to a particular project?  What type of finance do they offer?.
     
  • What fees and deposits are to be paid by the purchaser from their own funds, and are these accessible at the time of agreement.
     
  • Is there a requirement for documentary evidence to be sent or verified from overseas and the timelines to achieve this in relation to the agreed transfer date stated in the buyer seller sales agreement?
     
  • Is the property being purchased direct from a developer, or is there a current owner and does this person have existing finance on the property.
     
  • Is the property under construction, and who will be managing payments for construction costs? Are these to be paid direct to the developer, or managed through the escrow accounts?
     
  • What are the exact terms under which a customer is being offered finance.
     
  • If purchasing on the secondary market. Receipts from the seller for stage payment already made to the developer. 
     
  • If life Insurance is being taken, is there sufficient time to attend any required medical examinations, for the company to asses and give acceptance prior to draw down of the loan.

Said al Adhali is head of personal financial services support and operations at HSBC Oman. If you have any queries on this subject or another topic related to his area of expertise, e-mail muscatdaily@apexmedia.co.om

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