By the end of 2005, local interest rates are expected to rise by 1-2 percentage points. Thanks to the magic of compound interest, the actual impact on borrowers is much higher, with some estimating that for every one percentage point increase in interest rates, consumer purchasing power falls by some 6%.

Fortunately, heavy competition for customers by both financial institutions and property developers has made it more easy than ever before to secure the financing to purchase a new home.

Many banks regularly offer promotional packages with select developers or special rates and incentives for home buyers signing up for loans during any number of property fairs and exhibitions over the year.

For most people, a home loan will be the largest financial commitment of their lives. Would-be borrowers can save time, money and avoid problems by comparison shopping among different banks and considering their needs and payment ability both now and in the future.

Three key factors enter into play for any mortgage _ the amount of the loan, the interest rate paid and the term of the loan. All three are interrelated, and impact the size of your monthly payments as well as your ultimate debt load.

Most finance experts recommend that you spend no more than one-quarter to one-third of your income on housing debt. How much you can _ and should _ realistically borrow will vary based on your personal circumstances. What are your career prospects and ambitions? Do you expect your salary to jump sharply over the next several years, or are you willing to accept the tradeoff of more modest rises in return for greater security?

Does your spouse work? What about family plans? A cosy one-bedroom condo suitable for a newly married couple can become quickly cramped in the future if you add several young children.

When considering your potential budget, don't be tempted to overborrow or overestimate your salary prospects. There's no use in having a dream house that forces you to cut expenses to the bone in areas such as food, entertainment or travel. Indeed, you should consider the worst case scenarios _ if faced with an unexpected career change, will you be able to maintain your payments while you seek new work?

Most banks will be happy to offer advice on what is a realistic loan amount. After all, no bank wants to see their borrower default on their loan.

When you sit down with your banker, provide information on your assets and outstanding liabilities, such as school loans, car loans or other debt. You should be open and forthright _ the bank will be looking to judge your creditworthiness from your presentation and application.

Longer payment periods will stretch out your loan obligations and reduce your monthly payments, albeit at the cost of higher interest expenses.

Plan your term

You can plan your borrowing term to roughly mirror your career term _ a young professional in their early thirties can probably expect 20-30 years of work ahead before his retirement, which can be easily matched with long-term debt.Most banks now offer simple loan calculators that can help you quickly calculate monthly payments based on the size and length of the loan.

When trying different numbers, don't assume that interest rates will remain at today's low rates of 5-6%.

Use a more conservative number, such as 8%, to build yourself a cushion and also convince your banker that you aren't borrowing more than you can handle.

Local banks now offer a bewildering number of packages and options for the new homebuyer, with most centred on the question of fixed or floating interest rates.

Fixed interest rates are rates that are set for a specific period of time, whereas floating rates vary based on the bank's own general interest rate structure. With experts unanimous that interest rates will rise in the future, fixing rates today can lead to considerable savings in the future. Another advantage is that fixed rates can help you plan what your payment burden will be each month. With floating rates, what you pay today could change significantly five years into the future, let alone over the course of a standard 20-year loan.

Of course, banks are now becoming more stingy with their rate structures, and more are offering fixed-rate periods of just 1-2 years followed by floating rates. Again, it pays to compare different options provided by different banks.

As far as loan terms go, most banks advise customers to take out longer periods than one might otherwise select. While you will pay extra interest over the course of the loan, the benefit comes in lower monthly payments and an added safety cushion if your personal finances become temporarily upended, say due to a medical expense or job loss.

And with a longer-term loan, you can still make additional payments if you wish, effectively reducing your total debt quicker than normally scheduled.

Let's say you have a three-million-baht mortgage at an average 8% interest rate over 25 years. Your monthly payment comes to around 23,000 baht. But a bank might allow you to pay double that each month without incurring any penalty, raising the potential of reducing your loan term to just eight years.

In setting your payment strategy, note if there are any pre-payment or refinancing charges. Some banks will impose an early payment fee of 2% of your loan if you repay within three years.

How the interest rate is charged can also make a difference. Some banks will allow you to stipulate a flat rate repayment, where each instalment remains the same, or a step instalment, where monthly payments are lower in the beginning and increase in the future, when the borrower's income presumably is higher with career advancement.

You can enhance your ability to borrow by bringing on a guarantor or co-borrower to your loan. In some cases, a co-borrower will help you arrange for a loan amount higher than your credit would otherwise justify. Most banks stipulate that a co-borrower must be a person such as a spouse or sibling to the main borrower.

The fine print

Miscellaneous charges can build up quickly for any new borrower. Study the loan contract carefully for what expenses might be involved, whether it be a front-end fee, application fee, pre-payment fees or other charges. Banks often will impose a valuation fee on the borrower to cover their expenses of assessing the property to be purchased. Stamp duties, fire and property insurance and even mortgage insurance are other charges that could be added to your payments.