February 25, 2022
What is Home Loan?
Everyone seeks a comfortable shelter which they can call as home sweet home. Not everyone can afford to invest in buying a home or a property. So they seek out for a home loan in easy, affordable terms and conditions.
You get your home loan from a bank. Upon checking all loan requirement criteria, the bank pays the major percentage of the loan and the rest amount you have to pay. The lending bank will give you the loan by taking your new home or some of your primary assets as mortgage.
They would then charge interest on the loan, which has to be paid over a period of specific time decided by legal agreement between you and the bank. As a borrower you have to pay back the loan along with accrued interest in regular monthly installments called EMI (Equated Monthly Installment).
Benefits of Getting Your Home Loan
– You can buy a house or build one from scratch with your low personal budget.
– It provides you with an opportunity to own your own home without any renting hassles.
– It gives you an opportunity for investing in property as well as getting an asset that will increase in value over time.
– It helps people who are middle-class or upper middle-class, who haven’t secured enough money for their down payment and closing costs of buying an expensive home property.
Requirements to Apply for a Home Loan in Bangladesh
You need to fulfill some requirements legally mandated by Bangladesh Bank before you can apply for a home loan in Bangladesh. Each and every Government approved bank in Bangladesh must comply with the guidelines of loans sanctioning set by Bangladesh Bank. When potential clients apply for home loans, the banks evaluate those applications on individual basis taking consideration of their respective policies.
The requirements include:
• Property Age
• Your Age to avail a Loan
• Your income range
• Debt Burden Ratio (DBR)
• Length of work experience aka income duration
Banks typically provide loans based on the age of the property that someone is looking to purchase. The newer the property, the more likely it is that bank will lend towards its purchase. In Bangladesh, banks are more likely to provide loans for newly constructed properties than they are for old homes which need extensive work or renovation.
In Bangladesh, the Government approved banks provide home loans under several categories, like flats or apartment purchase, home renovation, construction of new house in a newly bought piece of land, etc.
A potential borrower face several hassles on applying for a home loan if the age of the property is over 25 years. A few banks like Eastern Bank, NCC Bank, Dutch-Bangla Bank, etc provide flexible terms and low interest rates to allow home loans for buying old apartments or their renovation.
To put in simple terms, the newer the home property is, the higher the probability of getting ‘home loan’ approval by our banks.
Your Age to Avail A Loan
In Bangladesh, usually the loan repayment tenure of most home loans are up to 25 years. That is why the lending banks put emphasis on the borrower’s age limit during the process of home loan approval.
Simply put, banks calculate the prospective working age of the borrower at the end of the loan tenure.
Our observation reveals that the majority of banks in Bangladesh offer home loans for individuals aged utmost 65 years – to keep in par with the end of loan repayment tenure.
The minimum age to get a home loan varies from bank to bank. Generally, banks sanction loans to the deserved candidates aged at least 20 years old. However, this minimum age limit can be a bit lower, – but not under 18 years (the legal banking age).
Your income range
In Bangladesh, banks expect a minimum range of gross income per month to choose a potential client for home loan approval. Since 2019, Bangladesh Bank has increased the maximum limit for home loans to Tk 20 million from Tk 12 million due to rising apartment prices and the purchasing capacity of middle-class people.
Our survey shows that more than half of the banks in Bangladesh are willing to provide a home loan to you as long as your monthly income is more than 45,000 BDT and you have at least 12 months of similar steady income records.
However, the requirement may slightly increase for the self-employed people like doctors, businessmen, freelance professionals, consultants, etc. Some state-owned banks have flexible rules for government employees.
Debt Burden Ratio (DBR)
Debt burden ratio calculation is the bank’s way of understanding how much debt you have and what your monthly expenses are. The expenses may include your monthly food sustenance costs, house rent, utility costs, interest rate of another loan, etc.
This calculation is done by dividing your total debt and expenses by your gross monthly income. The lending banks try to approve home loan applications when the potential debtor’s DBR value is comparatively low but they belong to a group of high income earners.
However, DBR limit is not a fixed issue. In fact, the maximum allowable DBR margin might vary from one client to another depending on his/her level of income earning. For example, an individual’s monthly income is 40,000 BDT. Now, usually the banks won’t offer him a loan if his DBR crosses 45%. However, the same bank may allow a home loan for another client scoring a high 60% DBR, while s/he earns about 3 or 4 lacs (BDT) per month.
Length of Your work experience aka income duration
Banks here in Bangladesh or anywhere in the world usually consider a borrower’s work experience when evaluating a loan application. This help them manage risk by giving selective loans to good borrowers, while putting off bad ones.
When reviewing an application for a home loan, the lending banks consider several issues under the work experience criterion, such as job category, number of servicing years, employer’s company reputation, and stability of employment, etc.
Traditionally, banks of Bangladesh required 2-3 years of experience for service holders. And self-employed professionals or consultants need to show the age of their valid trade licenses.
How to Find the Best Deals for Home Loan in Bangladesh?
The best way to find the best deals for your home loan in Bangladesh is to compare and contrast different loan (alt called mortgage) options of several banks. The easiest solution is to check on a bank comparing website like: BanksBD (banksbd.org) or make your own research on Bangladesh Bank site (bb.org.bd).
At present due to a boom in real estate sector, a considerable number of banks are offering lucrative home loan offers on the market. It ranges from 9% to 15%. It is quite confusing for any individual to pick the most effective offer out of all, so check our article on best banks for home loans in Bangladesh 2022.
Your research should take into account the interest rates, the monthly payment, and the total amount you’ll need to pay back in monthly installments called EMI. You can only get a clear picture by extensively comparing interest rates and monthly payments from different banks. Then, you can narrow down your search based on your needs such as how much money you have saved up for a down payment or how much money you want to borrow.
There are a few steps that you can take to find the best deals for your loan in Bangladesh. Also you can take help from our reputed real estate assets company (GLG Assets) to get your survey done on choosing a nice property asset -a luxurious apartment or flat in the heart of Dhaka City, which you can call your home.
We have ongoing projects in Mohammadpur, Kalabagan, Kakrail areas and near Japan Garden City, Adabor. Have a look on what we have to offer to build your brand future homes –Here.