As you start making plans towards acquiring a dream home or a condo unit, it is important to first consider your available financial options namely in-house financing and bank financing.
What’s the difference between the two? Read on and learn.
1. Assessments and Requirements
It is no secret that banks are usually stringent when it comes to loan applications. For once, you will be asked to submit numerous documents and requirements for you to be considered, some of which would be financial statements, Income Tax Return, certificate of employment, pay slips, business registration, and many others.
Additionally, employees must meet basic minimum requirements (such as regular employment for at least two years and a specified minimum monthly income). For self-employed applicants, you need to show that their enterprise has been around for a minimum of two years and are earning significantly.
On the other hand, in-house financing does not require much paperwork aside from the usual certificate of employment or source of income. You’ll have higher chances of getting your loan approved but the downside here is that you will have to shoulder the down payment of about 10% to 30% of the property’s total price.
2. Loan Interests
As for the interests, you get to enjoy bigger advantages with bank loans since they offer lower rates ranging from 5% to 12% per annum. In comparison, in-house financing has about 14% to 18%. Rates are fixed for in-house financing, however, while bank loan rates are flexible, depending on the economy so it may increase or decrease.
3. Payment Terms
As for payment terms, bank loans will give you about 5 to 20 years to pay off your debt while in-house financing only allows about 5 years only.
So as you look at it, your choice should depend on your financial capacity and which financing option is most preferable based on that. Go speak with bank loan and in-house financing representatives to learn more.