Reading time: 7 minutes, Category: Finance & Economics
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Disclaimer: This article is provided for general information purposes only, does not consider your objectives, financial situation or needs and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.
The home loan application and approval process can be complicated and stressful in Bangladesh, especially when it comes to apply for construction loans for new flat sales and projects in Dhaka. For this reason, the BestBari published this article, which includes our top tips to help borrowers with their construction loan application process.
Applying for 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. The home loan application process can be gruelling process in Bangladesh and 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.
Knowing the basics of mortgage loan procedures in Bangladesh is critical, especially for first-time borrowers in order to reduce costs and complexity. To better understand the home process in Bangladesh, we suggest understanding the basics of the home loan process by reading this home loans article. In addition, when it comes to applying for a new construction loan, we also suggest reading this article about types of loans to understand the different types of home loans offered in the market.
Getting your all of you documentation in order
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.
In terms of the borrowing securing the construction loan, there are certain requirements which need to be fulfilled. This is where a professional legal advisor or solicitor usually comes in handy for the borrower given that there are many technical and legal issues which need to be addressed and which helps prepare the borrower in terms of the type of loans they can expect to secure from the banks and instiutions.
For example, the construction loan process can start with an estimated valuation report, which lawyers can assist in preparing for the borrower. 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 to compare Bangladesh home loans
Now that you understand the different types of loans offered in the market, it’s time to do your research and compare the offerings from different banks and financial institutions. It really does pay to do your research, especially when it comes to selecting which bank or financial instition 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. 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.
Contact us if you would like us to refer you contacts of banks that are currently providing attractive interest rates and offerings. We can provide a complimentary consultation about the right type of loan to apply for and offer you access to the very best interest rates, discounts, processing times to help securing financing fast for 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.
If you already know the budget of your desired flat sale in Dhaka and also know how much you would like to borrow, you may like to use Bestbari’s free home loan calculator to get an idea of your regular repayments, which can be usful for your cash-flow budgeting and expenses.
The BestBari free home loan calculator helps you estimate your regular repayments for your cash-flow budgeting.
Pay close attention to the details in your building contract and construction loan agreement
Building a home is already complicated enough and involves multiple parties including builders, contractors, banks, solicitors and accountants. With so many people involved in the process, there’s always the possibility of a communications breakdown and things may go wrong.
The property builder should send you an estimate on costs invoice for the construction work and materials. Make sure to thoroughly go through the fine details with your solicitor and don’t overlook the minor quotes. It is quite common for borrowers to hire builders to complete other work such as landscaping, utility connections and additional construction work.
Similarly, it is common for borrowers of new construction loans to overlook the fine print in their contruction loan agreement. Borrowers 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).
Get the right insurance for new construction project
Last but not least, make sure you get the right insurance for new construction project. No one ever plans on something going horribly wrong with the construction of new home, but when something does happens, it’s a relief to have the coverage.
Therefore, it’s important to carefully review your insurance coverage and take the time to understand it fully, especially when it comes to new construction projects because there are many factors outside your control such as errors made by builders, accidents, the weather and so on.
It’s also important to know the limits of your coverage, as well as any exclusions in your policy. For example, if you live in an area prone to floods, make sure that your home insurance includes flood coverage. Lastly, do your research to compare the best premiums and policy terms when looking for home insurance for new construction projects.
Don’t just go with the first policy you come across or stick with your current provider without checking to see if there may be better coverage options available from another company. Contact us if you would like to speak with an insurance specialist to compare different insurance policies for insuring your construction project for your new home.
We hope you enjoyed reading this article published by BestBari, a leading BD Property online marketplace and innovative real estate company in Bangladesh.
If you would like to find out more about purchasing commercial property or flat sales in Dhaka please contact us to book in a complimentary consultation with one of our trusted property consultants.
