Buying an apartment is a significant investment, and it requires financial stability. Securing a home loan in Bangladesh can be lengthy and complicated, no matter if you are a first-time apartment buyer or you have been in this before. This overwhelming process can take a lot of effort and time from you. To take a home loan, first, you need to know the types of home loans and how the application process works. There are some crucial steps and terms involved with the process. And if you ever wondered or are currently planning to take a home loan, you are at the right place. This article gives you a brief description of home loans in Bangladesh. Moreover, you will learn some important terminologies and steps.
Types of Home Loans in Bangladesh
Banks offer different types of home loans in Bangladesh. However, if you solely plan to take a loan for buying your new home, banks and financial institutions typically offer two types of home loans.
Fixed-rate Loan
A fixed-rate loan is a popular loan method for most buyers. The reason for this is the constant interest rate. From the moment you take the loan, you will keep paying the same interest rate during your repayment period. Imagine you took a loan from the bank and agreed to pay an 8% interest rate over the taken amount. During your loan tenure, your interest rate will remain at 8%. Fixed-rate loans are stable and predictable. It gives you the exact amount you need to repay so you can easily budget your expenses and avoid any risks.
Variable-rate Loan
A variable-rate loan means that the interest rate on your loan will vary. This type of loan typically offers lower interest rates than a fixed-rate loan. However, the interest rate can increase or even decrease depending on the rate and condition of the market. After a certain period, the monthly amount you need to pay might go up or down. As a result, if the interest rate rises significantly, you need to pay a large sum of amount. Even if you take this loan, we recommend taking it for a short period of time. However, suppose you are confident that the rate will not significantly increase or even go down. In that case, you can take this loan at a lower interest rate.
What Is The Interest Rate of Home Loans in Bangladesh?
The interest rate on any loan is the extra cost added over the initial borrowed amount from the lender. The interest rate can vary depending on the type of loan. For home loans, the interest rate varies from bank to bank. Generally, the rate starts from 6% and goes up to 12%, depending on the bank. We recommend doing some research and comparing the benefits of different banks. Compare factors such as interest rate percentage, loan terms, and additional fees. Furthermore, pay attention to the interest rate according to loan terms, which is the given time you will need to repay the loan. You may come across loans from non-reputed banks with incredible benefits during your research. We recommend avoiding those for your own good. Remember, if it’s too good to be true, it’s most likely not true.
How to Get a Home Loan in Bangladesh
Getting a home loan in Bangladesh involves some important steps. But before these steps, banks and organizations check your home loan eligibility. Here are some standard eligibility criteria for obtaining a home loan:
Age Requirement
The age requirement is different from bank to bank. Typically, most banks give out loans to people between 25 and 65 to ensure the borrower has a stable income source. However, the loan term may vary depending on the borrower’s age. If the borrower is close to the retirement age, the loan term may be shortened.
Steady Source of Income
Your income plays a crucial role in being eligible for a home loan in Bangladesh. Banks and financial institutions will assess your income to ensure that you have a regular income source and the financial stability to make regular loan payments. The loan amount given to you will vary based on your income and occupation. For example, a self-employed person may be required to have more sources of income than a salaried person to be eligible for a home loan.
Employment Stability
Having a good and stable employment record means you have a steady flow of income every month. Banks and financial organizations place importance on stability and include a minimum employment year in their policy.
Debt-to-Income Ratio (DTI)
Debt-to-income ratio, also known as Debt-to-Burden Ratio, is a method for assessing financial stability before taking a loan. Most lenders use this method before initiating a loan. You can also calculate your own DTI. You need to divide your monthly total debt by your gross monthly income. If the DTI percentage comes out lower, it means that you have financial stability, making you eligible for a loan.
Property Age
Lenders evaluate the property you are taking the loan for. The evaluation criteria are different in various organizations. However, considerably newer properties are more likely to be eligible for the loan.
These are the primary criteria to get a home loan in Bangladesh. Some banks or lenders have their own method of deciding the eligibility. Consult with your lender and learn their eligibility criteria. Apart from the main application form, the lender will also ask for additional documents to further verify the eligibility. Except for the common documents, you will need to provide some particular documents based on your occupation.
Some common documents you need to avail a home loan:
Personal Documents
- National identity card
- Recent passport-size pictures (Attested)
- Latest TIN certificate/ E-TIN
- Copy of latest utility bill
- Recent passport-size photo, NID, office ID and business card of guarantor (if any)
For Salaried Person
- Salary certificate/Letter of introduction
- Salary sheet for last 6 months/1 year
Businessman
- Recent 3 years of business trade license
- Recent year’s bank statement of the company
- TIN, BIN, VAT Certificate and business card of the company (if applicable)
- Registered partnership deed
Self-employed
- Professional certificate
- Bank statement of last 1 year
- Self-income declaration on a professional pad
Property Documents
- Agreement deed
- Apartment booking documents
- Power of attorney acceptance letter
- Approved plan by RAJUK
- Other up-to-date property documents
Document requirements differ from bank to bank. Some banks may ask for a lot more documents to verify eligibility. Make sure to communicate properly with the concerned person to note down the documents needed. Creating a checklist of the documents and ticking off the documents after collecting them makes it easier to keep track.
You will come across different terminologies during the process of home loan in Bangladesh. Here are the common terms you should know about-
Principal amount: An initial amount borrowed from bank/financial institution to purchase the home.
Loan tenure/term: The amount of time given to the borrower to repay the loan to the lender. Usually, it is expressed by years.
Down Payment: The amount the borrower needs to pay immediately when purchasing a home. It is not part of the loan.
Grace Period: A short period of time given to the borrower that allows a delayed payment. No penalties occur during the grace period.
Margin: The borrower does not get the whole amount required to purchase a home. Typically, the lender will give approximately 70% of the property price as a loan, and the borrower needs to pay the remaining amount. This remaining amount is the margin or margin money.
Closing Costs: The fees and expenses related to finalizing a home purchase.
Before you look for an apartment, you must have a financial plan to support it. In most cases, you won’t have the whole amount to purchase the property. That is why you can look for home loans with terms and conditions that meet your needs to finance your new home. However, ensure that you have a proper financial plan figured out so that you can comfortably make payments on time to repay the loan without any penalties. You can consult with a financial advisor or contact Concord Property Solutions to assist you with getting a home loan in Bangladesh with favorable terms.
Frequently Asked Questions (FAQ)
How long does it take for a home loan to be approved?
Home loan approval depends on the bank. If all your documents are okay, your loan request will be approved within weeks.
Is it possible to make a pre-payment or partially repay a loan before the end of the tenure?
Yes. However, some banks don’t allow that. Make sure you consult with your bank before making any partial or pre-payment.
Should I go for a fixed-rate loan or a variable-rate loan?
A fixed-rate loan is always beneficial for home loans because of the fixed interest rate.
Which bank or financial institution should I take the home loan from?
Research the available options and compare the benefits the banks are providing. Choose the bank that best fits your interest. You can also take a home loan from our partnered banks.
Will there be any potential costs or fees associated with getting a home loan in Bangladesh?
Yes, there are some additional fees associated. Learn more about these fees from the bank/financial institution you are borrowing from.