Millennials and Gen Z, Consider These 8 Important Points Before Buying a Mortgage House

Who doesn't dream of having their own home in life? After years of hard work to accumulate wealth, one of the big goals is certainly to own a dream home. Mortgage houses (KPR) then become a solution that has long existed.

But is this really a practical solution to solve the problem of owning a home with current financial capabilities?

Certainly, before answering that question, you must know what a mortgage house is, the system used, its advantages and disadvantages, and the important points to consider when taking this type of credit. Without complete information, you might end up making the wrong decision and getting trapped in a financial loan in the long run.

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What Is a Mortgage House (KPR)?

A mortgage house is a house obtained through a loan. KPR stands for "Kredit Perumahan Rakyat" (People's Housing Credit), which is one way to pay for a house with a certain repayment period and agreed-upon interest rate between you as the buyer and the financial institution or bank providing the loan.

While this method entails long-term debt repayment, the extended time frame allows you to repay the debt in manageable installments according to your current financial ability.

General Procedure for Applying for a Mortgage House in Indonesia

To obtain a mortgage house, you must follow the system implemented by each financial institution. You can approach the financial institution or bank you trust, and it's even better if they have a partnership with property developers.

Carefully review all the requirements and terms applicable for applying for a mortgage house with that institution. Before approval, the financial institution usually reviews the mortgage application within approximately one month to assess the credit score of the individual.

Generally, to be approved, the maximum monthly installment to income ratio is set at 30%. This way, lenders will have confidence in the repayment ability of the individual. The mortgage system works by the bank providing a loan for the house you want to buy. Then, you have to pay installments in the agreed and predetermined amount. This means your responsibility is to pay the installments to the bank, while the payment to the property developer becomes part of the lender's responsibility.

Owning a House with a Mortgage, Profitable or Not?

If you think carefully and have enough info, buying a house with a loan can still be a good choice. But before deciding, think about the advantages and disadvantages.

As long as your considerations are backed by sufficient information and careful analysis, a mortgage house can still be an attractive option to take. However, before deciding on this matter, it's wise to consider the pros and cons of owning a house through a mortgage:

Pros of Owning a Mortgage House

• Lower Initial Costs, the initial cost you need is the down payment, which ranges from 15% to 20% of the house price. With the first installment payment and other fees, you can already occupy the house.
• Guaranteed Legality, mortgage house legality is assured, so you don't need to worry about it. Support from banks and legitimate financial institutions ensures the use of approved systems regulated by financial authorities in Indonesia. Houses supported by the mortgage system come with valid certificates and are not involved in disputes.
• Ready-to-Live Houses, Houses obtained through mortgages are ready to live in. So, shortly after the initial payment is made, you can immediately move in. In some cases, houses under mortgage are also rented out, easing the burden of installment payments. But for this, make sure to check the terms and conditions first!

Cons of Owning a Mortgage House

• Higher Total House Price, the total house price will be higher due to the interest that must be paid and the long repayment period.
• Risk of House Seizure, the risk of the house being seized occurs when there is a default in payments within a certain period. This varies among lenders and is always included in the agreements made. So, be sure to carefully read the terms of the agreement.
• Document Preparation, Several documents, including identification cards, Family Cards, Marriage Books, recent bank statements, pay slips, and various other requirements must be completed as per the lender's evaluation.
• Penalty Costs, Penalty costs are imposed if you want to pay off the mortgage after a certain installment period, and the amount depends on the agreement made.

Every financial institution or bank always has its own policies in providing mortgages to its customers. So, always carefully review all the terms and conditions before making a decision.

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Important Points to Pay Attention Before Making a Decision

Besides the three advantages and four challenges mentioned above, there are several crucial points to consider before making this significant decision. These points aim to help you make the best decision and acquire a home that meets your expectations.

• Check the Location
  Examine the location of the mortgage house thoroughly. Understand what you're buying and consider other factors associated with the location. Sometimes, tempting prices come with other obligations that require attention.
• Prepare Down Payment and Installment Money
  Start preparing the down payment and installments to be paid. Manage your income and expenses well so that KPR installment payments don't become a burden.
• Ensure Developer's Reputation
  The reputation of the developer is built over time. Check various projects handled by them and seek testimonies from people who have bought houses from them. Legally, you can verify the completeness of documents, permits, certificates, etc., to avoid future issues.
• Booking Fee Guarantee
  After deciding on the house, you'll be asked to pay a booking fee. Ensure this payment is accompanied by a written agreement or legal document. Ideally, there should be a booking fee guarantee from the developer if the KPR application is rejected by the financial institution.
• Know the Mortgage House Limit
  Understand the credit limit before calculating KPR simulations and making applications. Determine the required funds first to increase the chances of KPR approval.
• Calculate Interest Rates
  Understand how interest rates are calculated before choosing KPR. Request a repayment table simulation showing the monthly installment amount and the interest rate system to be used. The two most important types to understand are fixed interest rates or floating interest rates.
• Consider KPR Loan Period
  A shorter loan period means larger installments or down payments but is offset by a smaller total payment. The opposite applies as well. So, familiarize yourself with the available KPR loan period options, aligning them with your financial capability and future projections.
• Administrative and Other Fees
  Don't overlook the total costs involved in purchasing a house, whether cash or credit. Make sure you understand the various fee variables and their amounts to make a more comprehensive decision.

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Having a mortgage house is undoubtedly one solution to owning the residence you desire. With all the points mentioned above, hopefully, your considerations will be more comprehensive, and you'll soon have your dream home. To ensure the protection of your dream home, consider having home insurance like SmartHome Insurance offered by AXA Insurance Indonesia. This insurance provides coverage for property damage or loss resulting in financial loss, third-party property damage and/or bodily injury claims, and other benefits guaranteed in the policy terms. Affordable, practical, and beneficial, this insurance product will be the right safety net for your dream home!

References:

• https://sikapiuangmu.ojk.go.id/FrontEnd/CMS/Article/10415
• https://www.rumah123.com/panduan-properti/membeli-properti-1618-tips-membeli-rumah-pertama-anda-id.html
• https://www.gramedia.com/best-seller/kelebihan-dan-kekurangan-membeli-rumah-sistem-kpr/#Kelebihan_Mengajukan_KPR
• https://www.brighton.co.id/about/articles-all/kelebihan-kekurangan-kpr
• https://sikapiuangmu.ojk.go.id/FrontEnd/CMS/Category/47
• https://berita.99.co/hal-yang-harus-diperhatikan-sebelum-beli-rumah-kpr/
• https://ekonomi.bisnis.com/read/20210416/47/1382101/ini-yang-perlu-diperhatikan-saat-beli-rumah-dengan-kpr