Friday 3rd of February 2023

Important Things to Know Before Applying for a Home Loan

6 Home Loan Tips to Make the Right Decision

For aspiring home buyers, the good news is that the real estate market in Bahrain is booming with bright prospects. Despite the continued challenges from the Coronavirus pandemic, Bahrain’s real estate sector has witnessed a 14% and 20% increase in deals in the third and fourth quarter of 2020 respectively.

This can be the right time to invest in your dream home as the property prices are relatively subdued and there is a growing demand. And, thanks to home loans, owning a home has become very easy.

If you have identified a property and looking for a home loan, here are a few tips that may come in handy for a smooth and stress-free home buying experience:

  1. Get your Documents in Order

Having all the required documents ready will help accelerate the loan application processing. For starters, you will need your CPR or any other ID proof, bank statements, income certificate, salary transfer letter for employment proof and property documents.

  1. Determine how much you can Afford

It’s critical to calculate how much loan you are eligible for before applying. This way you can plan your home purchase expenses and budget better. You can use a home loan calculator to calculate your loan-eligibility and the indicative monthly instalment amount. You can enter different permutations and combinations of the loan amount, tenure, and interest rate to arrive at an affordable monthly instalment amount.

It’s recommended that home loan EMIs should not go beyond 25%-30% of an individual’s monthly disposable income. Any proportion that is too high can be difficult to manage, when other obligations arise.

  1. Compare Your Options

Compare the interest rates across different home loan providers to know who offers the best value in terms of cost. Your research should include crucial factors that determine the loan amount including the down payment, monthly instalments and repayment tenure. As home loan amounts are relatively larger than other loans, make sure you cover every detail and get to the nitty-gritty of what comes along before, during and after the home loan application.

Besides, ensure that the bank you choose provides attractive options including high loan amounts, flexible tenure and interest rates to help you make the right decision.

  1. Know the Costs Involved

Before opting for a home loan, it’s vital to know the costs involved. There are home loans that come with a fixed rate of interest across the loan tenure period and there are home loan variable rates with a floating interest rate that varies according to market conditions. Each type of loan has its share of advantages and disadvantages, so choose carefully according to your budget.

  1. Choose the Right Home Loan Tenure

Opting for a longer tenure might lower your monthly instalment amounts but may not be the best option as you may end up paying more interest. Ensure to stay in a comfortable range and choose as short a tenure as possible to drive down the interest rates. Use a home loan calculator to choose an appropriate tenure that matches your budget and get an estimate of your repayment schedule.

  1. Look for Subsidy Financing Options

Check if the bank supports subsidy loan schemes such as Mazaya that is a special loan financing facility run by the Government of Bahrain. This can give you a lot of advantages with a subsidised financing option and enable you to borrow 100% to 120% of the home’s value in an approved residential housing unit.

Whether you are a first-time buyer or want to transfer your existing loan, AUB has the right choice of home loans that comes with a host of premium benefits and competitive interest rates to help you purchase the dream home you have always wanted.

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