26 September, 2006

Home Loan Pitfall

Usually, most of the home loan packages in the market are having a minimum bonding period of 5 years. This is to protect bankers to earn back the expected revenue at the end of any early loan settlement from the borrower.

Of course, there are still some of the home loan packages which is NO Bonding Period constraint at all. No doubt such packages the interest rate will be higher.

The bonding period mostly is start from the date of full release of loan, but recently i notice some of the banks also offer to start calculate the bonding period from the date of first disbursement of loan.

Both packages are offering a good deal to borrower, however, the MAJOR difference here is the date of the commencement of bonding period. I am ok with the latter, but i have doubt on the former ( begin on the full release of loan ). For instance, under construction property usually it takes about 24/36 months, then plus 18 months for the last 2.5% of loan to be release at the expiry of defect liability period (after vacant possession issued). So it total up with 36 months + 18 months + 5 years (min bonding) = 9 years 6 months. Friend it is a decade of loan tenure before you can fully settle your loan without penalty, or looking for refinance.

This can make a huge difference and big gap in loan tenure, as refinance and help you to save up a big sum in interest and shorten your loan repayment.

Think twice and select carefully. Don't fall in this pitfall.!!