Considering how you’ve already built an emergency fund and have enough savings set aside to secure your family’s future, you may now feel like it’s time to invest. Though you have several investment options, investing in real estate is a viable option if you want stability and high returns.
Getting a home loan allows you to invest in a second home or upgrade your existing property, whether it’s purchasing a house and lot, constructing a house, renovating and restoring, or building rental property.
First things first: what is a home loan?
Home Loan is a financing granted by lenders to borrowers who wish to use the funds for their home loan needs. Repayment can be done in installment over the agreed period of time.
You can use loan proceeds for various purposes:
- Purchase a House and Lot
- Pay for a Lot and House Construction
- House Construction
- Purchase a Condominium Unit
- Purchase a Townhouse
- Renovate or Expand
- Refinancing or Takeout
- Reimbursement
- Personal Consumption
Depending on your preferred type of property investment, a home loan offers flexible solutions to provide you with the immediate capital you need to get started.
When applying for a home loan, it is important that you do your research on what’s out there. But if you already have a trusted provider, here are the factors to consider:
- Down payment
- Loan amortization
- Loan Term
- Interest rate
With a higher down payment, you can often expect lower loan amortization due to the lower loan amount.
The best way around this is to choose how much you can afford to repay monthly. The shorter the loan term, the better. And the sooner you finish repaying your loan, the faster you can move on to the next big investment.
Before investing in a second home, it is important that you can deliver on your monthly payments. With the right home loan, you can start enjoying passive income and grow your investments through a variety of ways.
Rental investment
You can invest in a second home through a home loan and generate rental income. Through affordable upgrades to your primary residence, you can build a room and have it rented.
This form of investment profit is often referred to as passive income, because after the construction, you receive a steady stream of income. As a landlord, you will have to deal with maintenance and occasional repairs.
| Advantages | Disadvantages |
|---|---|
| Simple | Longer returns |
| Affordable | Competitive market |
Depending on your location, the need for a place to stay can be seasonal or in high demand, such as in the periphery of Metro Manila’s prime business districts. Rental investments are simple and straightforward, but the returns can take a while.
Once your investment grows, you can either choose to add more rooms or buy another property to rent out. It won’t generate as much profit in a short time like other real estate investments, but it’s easy to scale up.
Does taking out a home loan and investing in real estate work?
The most crucial part in investing is making sure that you only borrow what you can afford to repay. It’s unadvisable to take out a loan and invest in any financial instrument if you’re not liquid. However, if your current rental rate is higher than your monthly amortization, then your rental property can be self-liquidating. Having an emergency fund makes it easier to manage debt and reduce risk, so before you decide to invest, build your savings first.
Open a Metrobank Savings Account today or apply for a Metrobank Home Loan. Feel free to contact Metrobank for any questions or inquiries.
