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The information in this article does not constitute as financial, legal or professional advice or any other sort of advice, and your should not treat any of the content as such. A qualified professional should always be consulted before making any financial decisions.
In Bangladesh, more people are opting for home loans and property market in booming. According to the Daily Star, “Banks and non-bank financial institutions (NBFIs) perceive the potential business of mortgage loans in the housing and real estate sector to be fast growing thanks to an expansion of the affluent class and people’s increasing spending capacity.”
In addition, the Daily Star mentions that the rescheduling of default loans has dropped sign to a seven-year low, since the Bangladesh Bank extended its policy to protect borrowers from financial challenges arising from COVID. “Last year, non-performing loans (NPLs) amounting to Tk 12,379 crore were rescheduled, the lowest since 2015, data from the central bank showed.”
These trends support the case for a strong residential housing market in Bangladesh. The rising cost of residential accommodation has boosted up the demand for Home Loans in Bangladesh especially in major cities like Dhaka and Chittagong. However, the home loan process in Bangladesh can be daunting and complicated, especially for first-time home loan borrowers. Thanks to the BestBari team, we have prepared this article that discusses tips and ins and outs of getting a home loan in Bangladesh.
Getting a Home Loan in Bangladesh
Typically banks in Bangladesh offer home loans (mortgages) a repayment period of up 25 years and offer financing up to 70% of the property value. Home loans borrowers also need to look out for other terms and conditions such as the interest rate on offer, hidden costs, early settlement facilities and availability of an overdraft facility and semi-pucca financing facility (if applicable).
Knowing the basics of mortgage loan procedures in Bangladesh is critical, especially for first-time borrowers in order to reduce costs and complexity. The home loan application process is slightly different to other Western countries, where banks in other countries can use standardised credit score to assess the credit risk of a mortgage application. Read the section below to understand the basic process for applying for a home loan in Bangladesh.
Applying for a Home Loan in Bangladesh
When applying for a home loan in Bangladesh, the bank will ask for certain security documentation such as the Mortgage and original title deed, Property insurance covering fire, earthquake, flood, and cyclone and Irrevocable General Power of Attorney (IGPA).
All documents are submitted to the banks, where the banks take clearance from the Bangladesh Bank on pending loans which is called a Credit Information Report (CIB). The CIB details any outstanding loans the person has or any default the person has made in terms of loan payments. The banks also investigate whether the property that is to be secured by the new mortgage has been secured for other loans, which has still not been paid off.
As part of the home loan application, loan repayments can be made in the form of monthly instalments. Borrowers typically have the option of different repayment periods between 5 and 25 years, depending on their initial deposit and financial situation. The monthly instalment is typically debited from your personal account with the bank and the interest is calculated on a monthly reducing balance.
In terms of the mortgagor securing the loans, there are certain requirements which need to be fulfilled. This is where a professional legal advisor or solicitor usually comes in handy for the mortgagor. There are some technical issues which need to be addressed and which helps prepare the mortgagor in terms of the type of loans they can expect to secure from the banks. It starts with the valuation report which lawyers can assist in preparing for the mortgagor. For further information, speak with a solicitor or contact us if you like to be referred to our trusted panel of qualified legal advisors and professional solicitors.
Do your research and compare different banks
It really does pay to do your research, especially when it comes to selecting which bank to borrow from for your home loan. If you are looking to fund your property with a home loan, make sure to get your pre-approval from a bank as soon as possible. The pre-approval will give you a good indication of what your maximum budget can be if you’re looking to borrow. The pre-approval will consist of the bank assessing your income and expenses and determine the capacity and maximum amount you can borrow.
Always compare your interest rate and processing fees before opting in for a home loan in Bangladesh. Also, be aware of the hidden charge. There are many cases where banks have misinformed people about home loans and charged borrowed substantial hidden costs. Home loans are available from large local and international banks such as HSBC, DBH, BRAC, IFIC, DBBL and Bank One. It is also worth checking out if you qualify to get a loan from the Bangladesh House Building Finance Corporation.
We suggest comparing a few banks in relation to their terms, offering and interest rates so that you make a careful and smart financial decision of which bank to go. For example, you can speak with a three or so banks and complete the pre-approval process to find out the terms and interest-rates on offer and go with the one that offers the best deal. Please contact us if you would like us to refer you contacts of banks that are currently providing attractive interest rates and offerings.
If you decide to go ahead with a home loan for your next property purchase, it is crucial to understand the home loan application process and risks before committing to a property purchase and new home loan. We suggest that you speak with a solicitor or legal advisor before signing any contracts, given how complex mortgage and property law is especially in Bangladesh.
Thanks to BestBari, we have done the hard work and research for you to find the very best interest rates, discounts, processing times across different banks and financial institutions to help finance your ideal flat sale in Dhaka. BestBari has exclusive partnerships with banks and financial institutions and we can offer you competitive home loans to make your dream home into a reality. Please contact our friendly home loan specialists and feel free to use our free home loan calculator tool.
If you need assistance on sourcing a lucrative property for purchase in Bangladesh, please contact us. Our team of property specialists in Dhaka will reach out and help you find your dream home, at a cheap price in your budget using BestBari’s network of premium real-estate brokers and property developers. We will then simply connect you with the real-estate broker or property dealer according to your wishes, free of charge.
On behalf of BestBari, we hope you have found this article useful and found ways to help you understand the process of getting a home loan in Bangladesh. Please visit our Home Loans section to find the very best interest rates, discounts and processing times with partnership banks and financial institutions. Also visit our News and Reviews page for more useful articles such as Tips for saving for a Dhaka flat.
We wish you the best and hope you find your dream flat for sale in Dhaka.