Nearly 70% of mortgage borrowers defaulted after year 3 and lost the value of their paid investment
There are many challenges that arise when we want to start buying housing using bank financing. According to the survey, consumers say the number one barrier to buying a house is sufficient savings or funds to pay a down payment. What exactly is a down payment? Down payment is the money you spend from your own pocket to make purchases, and the next question is what is the ideal down payment for a home purchase.
A smart rule of thumb is to have funds available to make a down payment of at least 20 percent of the price of the house (house or apartment). This percentage value is the best standard that people often don’t know or even forget. Moreover, the promotion of 0% down payment or small down payment is very rampant, which are campaigned by both banks and property developers
Then why do we need to understand the importance of down payments of at least 20% of the selling price where the remaining 80% can use bank financing? The value of 20% is the minimum, and it would be even better if you provide more down payment to make a home purchase
Reason Number 1 : Increase Opportunities to Get Bank Financing
Basically, the banking industry will prefer buyers as debtors who have sufficient purchasing power, so that by making down payments of at least 20% or more, the chances of obtaining bank financing will be much greater than less than 20%
Reason Number 2 : Avoid high insurance costs
If you only pay a down payment of less than 20% of the selling price, then generally life insurance or other insurance that often debtors or buyers do not know will be greater, this is because the financing party or bank needs steps to minimize risk in case of failure. payment or other things that pose a risk to the smooth payment of the mortgage installments. So it can be said that buying a house with bank financing and a small down payment (DP) will have an impact on higher costs for those of you who must be paid in advance
Reason Number 3 : Asset Value Is Not Commensurate With Debt Value
If you make a purchase with a small down payment and a long term, for example 10 years or more, then the growth in the value of your assets will not be proportional to the value of your debt because the average growth in asset value per year is around 5% per year while the interest rate on debt generally 3% – 5% more expensive than the increase in property value, not to mention the decline in the value of the building which will worsen the condition if you intend to make repayments when experiencing financial problems or for the purpose of refinancing (moving financing) to another bank
So it can be said that when you want to sell a residence with the aim of buying a new residence when your bank debt is paid off in the 10th year or even more, then you have suffered a loss of 30% -40% of the money you spend.
These are the 3 main reasons why you need to review if you intend to buy a house or apartment with a down payment of less than 20%.
And to provide this solution, Loyagami Space provides a purchase solution through rental, where we can help potential buyers to raise money in advance without losing their dream house because it has been sold (as a strategy often used by sellers to suppress buyers) and the selling price remains the same for The next 1 or 2 years, where we buy the house we want and allow personalization through a rental scheme
And if you don’t get bank financing after year 1 or 2, then the price increase to buy can be negotiated so as not to burden potential buyers. This solution only applies to housing that is ready for occupancy or secondary housing