Home Loan
Home loan for house purchase
The purchase of a house is normally financed by a home loan from a financial institution. This is true even for people with loads of cash.
A common rationale cited against purchasing a house with cold hard cash, even if it is within your means, is that you would be able to off-set the interest payable on the home loan with the higher rate of return on investment if you were to instead invest the cash in a higher paying investment portfolio such as a mutual fund.
Home Loan Letter of Offer
An example of a Letter of Offer for a home loan is provided here for educational and informational and guidance purposes only. It shall not in any way howsoever be treated as constituting legal advice, or anything remotely like that.
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[letterhead of bank]
[date]
[name of borrower]
[address of borrower]
Dear Sir,
HOME LOAN FACILITY OF [amount of loan]
MORTGAGE OF [description of property] AT [title description] (the "Property")
Thank you for choosing [name of bank] (the "Bank"). We are pleased to offer you a Home Loan Facility on the following terms and conditions.
Home loan facility for purchase of the Property:
1. Mortgage Type
Standard home loan with equal monthly instalment over the tenor of the home loan.
2. Loan Tenor
XXX Months (YY Years)
3. Margin of Financing
90% of current Open Market Value of the Property based on the valuation carried out by a licensed professional valuer appointed by the Bank.
4. Term Loan Amount:
[amount of loan] Dollars ($XXX) inclusive of Mortgage Insurance premium of [amount of insurance premium] Dollars ($YYY).
5. Interest Rate
0.75% above the Bank's Base Lending Rate.
6. Default Interest
Default Interest levied is 1% above the Prescribed Rate or such other rate as the Bank may at any time or from time to time stipulate on the instalment and/or interest or any other sum at that time due, or in arrears calculated from the date of such default until the payment of the amount thereof together with a fixed administrative charge which the Bank may stipulate.
7. Repayment
[amount of instalment] Dollars per month. This amount is subject to change based on the prevailing Base Lending Rate.
8. Security
a) A Home Loan Facility Agreement is to be executed and stamped for the amount of the loan.
b) Open All Monies 1st Party Mortgage/Charge is to be executed in respect of the Property.
9. Valuation
This Home Loan Facility is conditional upon the Bank receiving a valuation report prepared by the valuer appointed by the Bank confirming that the Open Market Value of the Property (which is to be provided as security) is not less than [value of Property] Dollars failing which this Letter of Offer shall be null and void.
10. Insurance
a) You are required to take out insurance for the Property against fire and extraneous perils with an insurance company approved by the Bank for such amount as the Bank may require.
b) You irrevocably and exclusively authorize the Bank to arrange such insurance on your behalf for the tenor of the Home Loan.
11. Special Conditions
a) Property is to be registered in your name.
b)
A Home Loan Facility Agreement and an Open All Monies 1st Party Mortgage/Charge are to be executed by you.
c) You are to take out a Mortgage Insurance policy with an insurance company approved by the Bank nominating the Bank as the beneficiary for the whole of the loan amount and loan tenor commencing from the first loan drawdown date.
d) A one time set-up fee of XXX Dollars is payable upon acceptance of this Letter of Offer.
We thank you for giving us the opportunity to be of service to you.
Yours sincerely,
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Manager
Mortgage Department
ACCEPTANCE BY BORROWER
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I acknowledge receipt and hereby confirm I understand and accept the above terms and conditions.
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[name of borrower]
[date]
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