BUYING A HOME FOR AN INVESTMENT ( APPLYING FOR A HOME LOAN ? )

 

Before committing to a property purchase, you should check your Debt Service Ratio (DSR). This is the ratio of total debt to one’s household income.

It is calculated by dividing your nett income with your total monthly commitments and future mortgage loan.

Your DSR will help you determine which financial institution’s offer you should consider taking up a loan from, as different financial institutions have different DSR requirements.

This is important as their mortgage products vary in terms of interest rates and flexibility. With the Overnight Policy Rate (OPR) currently at an all-time low of 1.75%, it is recommended to take a housing loan while the rates are low.

This is because if you take out any loan after the OPR decreases, it will cost less for you because of the decrease in the loan's interest rate.

Or take a flexible loan*, where you can put additional money into your loan account to reduce the interest on your principal amount. If you require the excess funds, you can easily withdraw them from your account.

*Note: As flexible loan products vary across different banks, it is recommended that you check with the bank to better understand the features available.

It is important to remember that all investments, including property investments, come with risks. A profitable sale can sometimes take months or years to happen.

If you need cash in a hurry, you may find yourself in a bind. Another point to consider is the upkeep of investment properties.

Although you may not be staying at your property, you will still need to keep the place looking presentable for potential tenants or buyers.

This means you will need to continuously invest in its upkeep. One good way of saving is making sure that you get the best housing loan package.

Do your research: Survey the market, make inquiries, list down the pros and cons of each housing loan package before deciding on which to take up.

One housing loan offer that you should consider is Alliance Bank. The bank is now offering loan rates as low as 2.9% p.a. for all home buyers, whether your first, second, or third purchase.

Property Advisor’s analysis of residential transactions carried out in Q1 2021 revealed that Ipoh is among the top three areas with the highest YoY appreciation from Q1 2020 to Q1 2021 which saw an increase of  30.32% in median prices.

As the state capital of Perak, Ipoh is a popular domestic tourist attraction known for its delicious food and stunning views of the limestone hills.

Besides being an excellent place to set up a homestay or AirBnb, it appeals to the older generation. The traffic is less congested than in other big cities, making it ideal for retirement.

*Info and images credit to PropertyGuru 2021*