Sunday, February 17, 2008

Considerations when buying a home or obtaining a bank loan

The advises posted by Salve in her Money Smarts blog with the Daily Inquirer is suited, not only when you are planning to buy your own home, but in all situations that deal with monthly payments (when you get a big loan) and bills (CP or DSL subscriptions, among others).

Before doing anything, think about cash flow, and asked your self:

Is your expected income sufficient to cover the amortization?

Before getting that house, can you really afford it? When getting a DSL connection, are you really going to spend time on the internet, and use it? If you are going to use internet for only a few hours in a week, or only on weekends, is it really worth it? How will it affect your cash flow?

I knew some relatives who are in the PNP who get 300K loans, and can hardly afford the monthly payments, wreaking havoc on their cash flows they end up getting loans at usurious rates from somewhere else. Worse their 300K loans was used to buy liabilities instead of assets.