Buying a house and lot, need your opinion

[marissapedroza]

Currently my wife and I decided to bid for a house and lot, right now 2 banks has offered us for a home loan.

Bank A (who owns the House and Lot) offers us 20 percent downpayment with 8.5 percent interest rate.

Bank B offers us 50 percent downpayment with 6.5 percent as interest rate, another catch wit this bank is that we will be able to occupy the property after 9 months.

If we select bank B we will have atleast 1M remaining as emergency fund but we will save around 300kish in payments & interest. Our monthly will also be cut in half compared if we select bank A.

In my mind I am opting to select bank B because in the long term i believe it will be much easier for us to pay the house. What do you guys think? What else do you think I have not considered?

 

[mmiller]

@marissapedroza Sounds like B is a good choice. I'd rather pay 50% knowing that I'd have a home within 9 months.

A seems to be a risky option.

 

[nate10213]

@marissapedroza I'd say B if you can afford it.

Pero something important to know din is kung fixed ba yung terms?

What if yung 6.5% is fixed lang for 3 years? Then after 3 years maging 9%? I hope tiningnan mo din yung part na yan since di mo nabanggit eh. I think it's quite rare now for a bank to offer loans na fixed yung interests for the duration of the loan unless it's a short term loan.

 

[marissapedroza]

@nate10213 Thanks, I will ask my agent.

 

[marissapedroza]

@nate10213 fixed daw

 

[lrs6]

@marissapedroza Why 9 months pa?

 

[marissapedroza]

@lrs6 Since ibang bangko mejo matagal daw po processing

 

[ostinoss]

@marissapedroza Choose B if you can afford it. The money you save goes to your EF again

 

[kirae]

@marissapedroza B.

Always pay as much as you can afford for down-payment.

 

[nctpremill]

@kirae I think case to case ito, not necessarily always the case.

Kung may business ka na magagamit mo yung pera to provide more money for you, then assess mo if your income from using that money is higher than the interest expense from the bank.

For example may option kang mag downpayment of either 2M or 3M. Tapos for the sake of simplicity, let’s say that the 2M DP scheme will incur an additional 300k interest expense compared to the 3M DP scheme.

Kung yung 1M na yun kaya mo mapalago to 1.8M, meaning you would profit 800k from it. Kahit mas mahal interest expense by 300k, bawing bawi mo naman na with the 800k profit. You’d be better off by 500k.

Pero syempre depende, for most people na hindi naman din nag bubusiness, safer route for them to go with your suggestion na just pay off as much as you can asap. Pero saying lang na it’s not always the best choice.

Experience ko lang as a real estate agent, none (or very rarely) of our clients pay full cash even if it would give them a 25% discount on our high end projects even if they can afford to do so

A lot of them still choose the lightest schemes even if it would cost them a bit more

 

[kirae]

@nctpremill That's why I said as much as you can afford.

Of course if your money is rolling, common sense says to continue with it and just use the spare cash that you have.

I never said to use up all your money did I?

 

[strawblonde]

@marissapedroza Compute net interest savings. At this time, keeping cash and place at 6-7% bonds may be a good idea. You will pay down that house anyway. Go looooong. Like renting to own.

 

[virgy]

@strawblonde Yep dami mo magawa sa cash on hand. Unless bahay lang talaga ang end goal.

 

[artistec]

@marissapedroza B, make sure the interest is fixed

 

[jamestown57]

@marissapedroza Bank A when can you occupy the place?

 

[marissapedroza]

@jamestown57 in a. month

 

[randywmoore45]

@marissapedroza I think you should compute net present value and consider:

1.) How much is your current rent? Assuming it's 20k/month x8 months = 180k saved by moving in earlier.

2.) How much money you'd make in interest if you invested the difference between the 20% vs 50% down payment? That difference at say 3% interest rate with an investment would be significant and allows you to be more liquid (it's easier to sell index funds vs taking a loan against the home equity). 100 pesos today is worth more than 100 pesos 30 years from now (depending on the length of the loan).

 

[jamestown57]

@marissapedroza Just go with B. 9 months fly by fast

 

[ruien]

@marissapedroza Based on the prices mentioned, it seems to be within Pag-Ibig's striking distance.

If Op doesn't mind me piggybacking, does Pag Ibig have any advantages for a property that is around 2M?

 

[marissapedroza]

@ruien I think there is none. The only advantage of pag ibig is its fast approval and less background check.