Buying a property is one of the smartest investments you can make in the long term. Property values will rarely decline over the years; rather, they are much more likely to rise in value, or at least remain the same. However, the sheer cost of funds required to purchase land and / or property means that it remains a dream come true for many people, regardless of their income. Buying a property worth at least several million rupees always requires some form of debt financing to be a viable investment. Fortunately, there are many service providers offering lines of credit specifically for this purpose. In fact, you will likely be inundated with the various options available to you that you may not even know where to start with.
Where do I begin?
Once you have decided that you are definitely going to buy property in the near future, your first step is to find the right property at the same time, as well as start preparing your finances. Once you find the perfect home / land / building / apartment, you can make an offer on site and complete the transaction to ensure you protect it before a competitor does.
Some of the types of real estate that may be required for financing:
- Buying or building a house
- Empty land
- Different types of buildings
- Condominiums, flats or apartments
- Sometimes even home renovation and improvement
- There are even loans to help you reconfigure an existing line of credit that you may have been holding back on.
When it comes to financing your purchase, you can choose from a variety of lenders. Most banks and financial institutions offer different types of home loans with different payment terms, interest rates and loan amount. Sri Lanka also has a growing market for online loans, which have proven to be extremely effective when used to finance large purchases.
Ideally, the first thing you should do is contact various lenders; start with a simple google search to create a list of options. This list will likely include all major banks and financial institutions. Next, you should go to them and get the following information from each of them:
- Their interest rate
- How much money are you entitled to borrow from them
- Terms and conditions of repayment
- Any other benefits they offer
Once you’ve done that, don’t be afraid to get recommendations from friends and colleagues. Their offices in these companies may even offer you a better deal than what was originally offered to you. Some service providers even have special packages for different professions like university staff, government officials, doctors, military personnel, etc.
What are my loan options?
Typically, there are two types of ways to borrow money to finance a property purchase: a regular loan or a mortgage.
A loan is when a lender gives you an amount of money that you must pay back over an agreed period of time (sometimes up to 25 years for larger loans of this kind), with interest payments that act as the lender. payment for the provision of this service. This is the simplest type of credit line in Sri Lanka. There is a new and innovative type of loan, payday loans, that can help you solve your day-to-day financial problems. The kind of company that helps in such cases is OnCredit.lk…
The mortgage is slightly different. In layman’s terms, the lender will immediately buy the item for which you need money (in this case, real estate; but this also applies to cars), and you will need to pay the lender the cost of the item as well as interest. in an agreed period of time. The advantage of a mortgage over a general loan is that the interest rate is generally lower as the lender has more collateral in this agreement. If you fail to pay off the mortgage, they will return the asset and get their money back by selling it to the buyer. Mortgages are also commonly known as rentals in Sri Lanka.
How much can I borrow?
If you are an employee or a businessman (mostly generating some form of income on a regular basis), you will have the right to borrow money from a lender. However, this amount depends on a number of variables such as:
- Your income level
- Your social status (educational level, place of work, etc.)
- Any outstanding debt, loans or lines of credit (including overdrafts and credit cards)
- Past credit history (completed and declined loans)
- Your overall credit score
- How much do you deposit
- Relationship with the lender (if you have been their client longer, you are more likely to get approval for a loan)
If you manage to fulfill the above criteria flawlessly (and depending on the service provider you choose), you may find that you can even borrow up to one hundred million rupees with a maturity of up to twenty-five years.
What do I need to prepare?
While the list of documents you need to prepare to apply for a loan depends on the lender you choose, here are some of the most commonly required documents:
- Completed loan application form
- National Identity Card
- Salary statements for the last three months
- A letter from your employer stating your assignment, salary and length of service
- Certificates of education / professional qualifications
After you successfully submit your application, it can take anywhere from a few days to even several weeks before your loan is approved and you receive the money in your bank account. As such, it is always best to start securing your finances well in advance of the completion of the transaction, otherwise you may risk selling your ideal property to another party that was able to make the down payment faster than you.
What you should pay attention to
While the above seems pretty straightforward, you may find yourself hitting some obstacles along the way. Here are some things to look out for when applying for a home loan:
- The lender will not lend you the entire amount required; most service providers will lend up to 75% of the value of your required asset. You will need to find the remaining 25% elsewhere.
- Keep track of floating and fixed interest rates at the time of application; choose whichever suits you best, because even if you can change it later, there is a significant service charge.
- Inquire in advance about any other fees such as compound interest, late fees, service charges, handling fees.
Almost everyone finances their home or other real estate purchase with some kind of loan. While this is a huge financial commitment, it is a rite of passage into adulthood. With careful planning and choosing the most reliable lender, you can make your dream of owning a property come true.