Home purchase is a pleasant and at the same time responsible process. We make such purchase once or just a few times in our lifetime, while assumed commitments sometimes last for decades. Often, when choosing home, we follow our emotions and do not make an objective judgement of a situation. Therefore, before making this responsible decision, the most important aspects must be known.
What are your needs?
According to Sales Director of real estate (RE) developer Realco Marijonas Chmieliauskas, when buying new home, location is one of the most important criteria. When choosing location, lifestyle and needs must be considered: 'For families, availability of kindergartens, educational establishments nearby is important. If you are a single person, usually you are looking for home closer to the city centre or sports, entertainment and shopping centres. If there are family members who are not driving, you should consider availability of well -developed public transport infrastructure'.
Residual value of housing should also be considered, should you decide to sell or rent it out. 'With time, housing closer to city centre does not lose value, while locations with the balance of closeness to the centre and nature are in particular valuable' said Mr. Chmieliauskas.
How important seller's role is?
Mr. Chmieliauskas noted that with big supply of new housing the role of project developer and seller is also very import: 'When choosing a project, one should find out more about the developer: how many years on the market, which projects developed, which and how many projects were already completed. Smoothness of housing purchase process will depend on the seller, his/her professionalism as well. Mutual trust is important'.
What is important when signing a contract?
According to Mr. Chmieliauskas, proper time planning, clear understanding of terms are important in home purchase process. Before signing a preliminary contract and paying an advance, finding out your borrowing possibilities in a bank is recommended. If you have a possibility to pay by instalments when buying home, you have to find out payment terms and amounts of instalments. 'Project implementation terms must be clear: when construction must be completed, when property will be available for viewing, when notarial deed is planned. Knowing developer's obligations, guarantee conditions is important. No less important is for the buyer to understand his/her duties and responsibilities', explained Mr. Chmieliauskas.
What one should know before applying to a bank?
Once you decide to buy a property and take a loan, it is important to know that your own money has to account for minimum 15 per cent of the value or price of housing to be purchased. 'If you chose older construction housing, you may be requested even for bigger initial contribution. You will also be requested for bigger contribution if it will not be your first property purchased with a bank's loan', highlighted Swedbank residents financing expert Tomas Pulikas.
It is also important to know that the amount of monthly financial liability may not exceed 40 per cent family income. 'Besides, client's possibilities to pay loan contributions are assessed by a bank also by a hypothetical situation, that yearly interest rate reaches 5 per cent. The history of financial markets shows that the current low interest rate will have to rise sooner or later, therefore some 'space' must be planned and using family's borrowing possibilities to maximum should be avoided', advised Mr. Pulikas. SEB Bank Board member, Director of Retail Banking Service Vaidas Žagūnis emphasised that before borrowing a person must assess the future impact of this long-term financial obligation on his/her needs - maybe some habits will have to be limited or waived?
What is important when taking a loan?
'If before making a decision, a person will put aside the amount of housing loan instalment every month for half a year, then it will be easier to decide if he/she or his/her family are ready for that. If a person will feel limited too much, maybe it is worth postponing the decision or borrowing a smaller amount and choosing a more modest property', explained Mr. Žagūnis. Loan amount can be calculated online, in special bank calculators. Mr. Pulikas emphasised the importance of the sense of security: 'You should think what would happen if you would not receive regular income for a longer term or be ill for half a year. Therefore, it is worth considering insurance covers against contingencies in life'.
Mr. Žagūnis told that before making a final decision on acquisition of a specific property, it is recommended to assess also maintenance expenses – how much money will be needed for furnishing? Will renovation be needed? If yes, how much will it cost and from what funds it will be financed? What are property maintenance charges? 'It is very important to manage personal finances responsibly and to assume obligations after good consideration of one's financial possibilities. Poor history of person's payments can impair borrowing conditions, while unpaid debts in the past, arrears can even make borrowing impossible', emphasised he.
What determines good loan conditions?
To know bank's answer regarding housing loan, you have to fill in an application. Representatives of both banks recommend filling in an application for loan on internet bank – it will allow to save lots of your time. Bank assesses financial possibilities, income consistency, credit history (if he/she had or has debts), fulfilment of other obligations (timely payment for public utilities, telecommunications bills, etc.), other financial obligations of the applicant. 'Bank also considers the amount and term of requested loan, share of own money and then decides on the conditions and the amount of a loan to be issued', stated Mr. Žagūnis. He revealed that interest rate is determined by the conditions of bank's borrowing on the market and the clauses of a transaction itself, client's risk assessment and client's loyalty – how often and which bank services the client uses.
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