Types Of Home Loans in Bangladesh and how to get a home loan to buy a property

5 Type of Home Loans in Bangladesh

Are you thinking to buy a property and worrying about how to get home loans in Bangladesh? You do not need to worry. Because there are a lot of financial institutions that are providing many exciting home loans. In your real estate journey buying or selling a property is a very significant part of your life. Whether you want to buy land, an apartment or an entire building, buying a property in Dhaka needs a strong financial background. And for this financing, you may need a home loan where banks and financial institutions may help to ease your property buying process.

In today’s blog, we will introduce you to the types of Home loans in Bangladesh and how you can apply for a home loan to buy your dream property. After reading the whole article you will learn about

• What is a home loan?
• Different types of home loans in Bangladesh.
• List of home loans provider in Bangladesh
• Conditions to apply for a home loan.
• Little information about BHBFC (Bangladesh House Building Finance Corporation).
• Documents required to get home loans in Bangladesh.
• Advantages of Property loans in Bangladesh.
• Disadvantages of House loans in Bangladesh.

However, not everyone who wants to take out a mortgage is unable to raise the necessary funds. Those who are able to finance themselves are also at ease taking out a home loan in Bangladesh. Because making affordable monthly loan payments is much simpler than spending a sizable sum all at once.

What is a home loan?

A home loan, commonly referred to as a mortgage or housing loan, is a sum of money that a person borrows, typically from banks and other financial institutions. Depending on the loan’s terms, the applicant will repay the loan balance plus interest over a period of time that can range from 10 to 30 years in Easy Monthly Instalments, or EMIs.

Only the elite and middle classes in Bangladesh were formerly covered by this type of mortgage. However, several financial institutions in Bangladesh are now providing home loans from farmers to the upper classes at straightforward interest rates, circumventing this restriction.

List of home loans provider in Bangladesh

Top banks and financial institutions who are providing home loans in bd.

Types of home loans in Bangladesh

Different home loans are now being given in Bangladesh by a variety of loan provider institutions. The housing market in Bangladesh is expanding because of these home financing programs. The top 5 home loan types in Bangladesh are listed below.

1. Land Purchase Loan
2. Home Purchase Loan
3. Home Construction Loan
4. Home Extension Loan
5. Home Improvement Loan

Now let’s discuss in detail these property loans in Bangladesh

Land Purchase Loan

A land purchase loan is a type of loan agreement where a loan is provided for the purchase of land. This kind of home loan is provided by the majority of banks or non-banking financial institutions (NBFIs) in Bangladesh.

These are a few aspects of this loan scheme:

• You may be eligible for this loan up to 70–75% of the total land value, depending on the lending institution.
• The maximum loan term is 12 years, while some loan programs provide longer terms.
• Each institution sets its own interest rate for this loan.
• Since property prices are always rising, it is very simple and simple to obtain land purchase credit facilities.

Home Purchase Loan

The most cost-effective option for financing the purchase of a new or used home is a home purchase loan. In Bangladesh, regardless of whether the home is new or old, the home loan is the most widely used type of loan. Features of Home Purchase Loan are-

• All major banks and financial institutions (NBFIs) in Bangladesh offer home loans in various variants.
• Home purchase loans account for 70-85% of the total cost of buying a home.
• The tenure of this loan is from 1-25 years.
• The interest rate of this loan also varies from institution to institution. However, the current interest rate in almost all institutions in Bangladesh is 9-14%.

Home construction loan

A home construction loan is a loan that a customer takes out to finance the building of the home of his choice without first purchasing a pre-built home.A home construction loan is a loan that a customer takes out to finance the building of the home of his choice without first purchasing a pre-built home. Features of Home Construction Loan are-

• Consumers can use this loan to construct the home of their choice.
• Home construction loans lend up to 80% of the total cost. Tax exemption can also be claimed on this loan.
• Government employees will be able to take loans from any of the four state-owned banks and Bangladesh House Building Finance Corporation at 4% interest from April 2020. Because, here 5% to 9% interest is paid by the government.

Home extension loan

The loan accepted is known as a home extension loan if the customer wishes to expand his home, i.e., add a new floor, room, bathroom, kitchen, balcony, etc. to the property.

• A few banks provide this type of loan.
• In this loan, up to 70-80% of the total cost is available as a loan.
• The maximum loan term is 25 years. Consequently, you can choose the lowest EMI possible.
• You have a wide range of interest rate choices.
• Interest rates come in three varieties: totally variable, semi-fixed, and fully fixed.

Home improvement loan

A home improvement loan is a loan taken for interior renovations including up-gradation of electrical appliances, painting, water-proofing, electrical wiring, ceiling and tile repairs to give the home a new look.

The tenure of this loan is much shorter than other home loans. Besides, the interest rate of these loans may vary based on the financial institution.

Chat with us if you have any questions.

Conditions to apply for a home loan in Bangladesh

Many people purchase land or apartments with loans because, despite having the means, they lack the necessary capacity. However, even if you ask, banks and other financial institutions won’t grant you a loan. Apply to the lending organizations by following some guidelines. You will receive the loan if you are determined to be eligible by the institutions.

• Interest Rate: Before making a loan, every financial institution considers its interest. because the business’s income comes from interest. Interest rates differ between institutions. The Bangladeshi government has set a fixed interest rate of 9% for borrowers in 2020, though this rate may be lower in some institutions.
• Property Novelty: The date of the property’s registration is typically used by banks to estimate the age of the property. Major banks in Bangladesh are often more eager to offer mortgage loans for the acquisition of recently built real estate properties than for older buildings. According to the report, residences that are under 20 years old have a better chance of qualifying for a mortgage. However, a number of banks, such as EBL and Bank Asia, are fairly lenient when it comes to offering house loan facilities for buying older properties.
• Monthly Income: The monthly income has an impact on the customer’s ability to repay the loan. Because of this, while granting house loans, banking institutions inquire about the customer’s monthly income. The financial institutions provide loans if the yearly income of traders is BDT 200000 and the monthly compensation of employees is at least BDT 40000. However, restrictions on revenue may differ from one institution to another.
• Death Burden Ratio: Comparing a potential customer’s monthly gross income to their ability to repay a loan. DBR value is calculated using monthly income. Financial organizations are reluctant to grant the loan if the DBR value is more than the income.
• Age Limit: The maximum loan term is between 25 and 30 years. This suggests that the loan is for a considerable amount of time. Age restrictions are specifically in place for several types of house loans in Bangladesh for this reason. The loan is declined if the borrower is too old to repay the debt in full (over 65). An institution may have a higher or lower age restriction.
• Occupation of Borrower: A house loan’s eligibility in Bangladesh is heavily influenced by employment. Obtaining a house loan will be lot simpler if one holds a reputable position in a reputable company in Bangladesh.
• Having more than one earning person in the family: The possibility of being able to repay the loan within the specified time period is predicted by the number of wage earners in the family. If the loan application states that there are several earners, there is a good chance that the loan will be approved.

Documents required to get home loans in Bangladesh.

Documents required for taking a loan Building your own house is not a dream. Nowadays you can take loans for everything from building a house to buying land. But it is like you have to submit some necessary documents to the bank. Let’s see what documents are required for taking a property loan in Bangladesh

1. Photocopy of Voter ID Card. or driving license.
2. Two copies of passport-size color photograph
3. Trade license of business establishment (for businessmen).
4. Attestation letter from office (for employees).
5. National Identity Card and Photograph of Grantee.
6. One month electricity bill paper.
7. Bank statement for last six months.
8. Required documents if have credit card.

Advantages of Property loans in Bangladesh

• Fewer documentation is needed because there aren’t many consumers for house loans.
• If the loan is repaid on time, the borrower’s social standing would rise along with their CIBIL Score, according to Credit Information Bureau (India) Limited.

Disadvantages of House loans in Bangladesh

• The financing scheme must be used since the mortgage is long-term, lasting longer than 25 years.
• There is no going back once the home loan application is authorized.
• Your assets will be sold by the lender if you default on the loan so they may recover their losses.

The Bottom Line

With this comprehensive understanding of the many types of home loans in Bangladesh, you may make an informed choice on the loan that best suits your requirements. For the majority of individuals, getting a loan is the go-to method of financing whether they are purchasing, building, remodeling, or extending a property. Additionally, you must meet the significant requirements outlined by the banks and NBFIs in order to be eligible for these loans. Please leave a message if you have any other information on house loans.

Chat with us if you have any questions.

Please note:

• This information should not be considered legal advice. Consult with a lawyer before proceeding with a loan