Buying a property can be both exciting and challenging, especially when it comes to figuring out what type of financing to get. After finding that property that suits your investment criteria, the next step is to carefully review the budget to determine the financing option that will best suit your current financial status. Listed below are three of the most common financing options today.
Banks Offering Traditional Mortgages This is the most common option of homeowners. It’s easy to avail given you have a good relationship with the bank and have maintained a decent credit standing.
Pros: Generally offers lower interest rate than mortgage loans from other institutions. Easy to get one for people who already have a good and long relationship with the bank.
Cons: Hard to get approved if you’re a new client of the bank and pretty cumbersome to get all required documents. Very low chance of getting a loan if you don’t have a stable job.
Rent-to-Own Scheme If you are undecided yet in purchasing the property, then this is the perfect option for you. In this scheme, an agreement is signed where rent payments can be credited towards the eventual purchase of the property.
Pros: Provides total flexibility to those who are not yet 100% convinced of acquiring the property.
Cons: Monthly payments are usually higher than the going rental rates so if you decide not to continue with the purchase of the property, you end up paying rent at a premium price.
Borrowing From Family and Friends If you end up with a disapproved bank loan and can’t seem to find a good rent-to-own scheme, then you might want to consider this option.
Pros: No need to prepare tons of documents like identification and proof of income. Sometimes, if your family loves you enough, you can even get it interest-free!
Cons: The amount of borrowed money may not be enough to acquire the property. In addition, failure to pay the family member may cause strain in your relationship.