10 Important Questions to Ask Your Home Loan Financier
Buying apartment is a daunting task, especially when you consider the financing of your first dream home. Whether you are searching for apartments for sale in Dhaka or Chittagong, you should carefully plan how to pay for your home. As an apartment buyer, you can easily turn to financial institutions or banks for home loans. However, instead of making a snap decision it is best to evaluate several prospective mortgage lenders and then make the ultimate decision.
Real estate experts suggest that you should talk to home loan financiers at an early stage in the home buying process to be ready. Here are 10 essential questions you need to ask to ensure you are getting the best home loan deal.
What is the interest rate?
The interest rate is a crucial parameter to check when choosing a home loan for buying apartment. The loan amount along with interest rate and tenure will determine your monthly payment. Home loan with lower interest rate will reduce your monthly payments. You should compare interest rates of different financiers and find out which institution gives the lowest interest rate. You can even negotiate with your financier to avail home loan with competitive interest rates if you know current market rate. Currently most reputed financiers in the country are offering single unit interest rate.
Is the interest rate fixed or variable?
A fixed-rate home loan will have the same rate throughout the loan tenure, whereas variable interest rates change the rate after an initial period at regular intervals depending on money market conditions. If you go for variable interest rate, you should ask when the rate will change and by how much so that you know you will be financially solvent to repay the loan later on.
What is EMI?
EMI is Equated Monthly Installment. It is the amount you will have to pay to the financier and comprises of both the principal and interest amount. For example, if you take a loan of TK. 20, 00,000 with 9% interest rate for a tenure period of 15 years, then the EMI amount will be TK. 15,214. Basically, you will have to pay Tk. 15,214 to your financier each month for 15 years or 180 months.
What fees do I have to pay?
When choosing a home loan, you should be aware of the processing fee and other fees the financiers charge apart from the EMI. Make sure there are no hidden charges so you are not caught off guard later on. Usually reputed financiers have one time processing fee initially. You should also ask if there is any early or partial settlement fee applicable in case you want to repay early. There can also be other charges like service charge, insurance charge etc. If you think all these charges add up to a large amount, you should consider other financiers.
How to qualify for the loan?
Anyone can apply for home loan but to qualify you need to meet some criteria set by the financier, such as age, income, professional experience and so on. You have to show proof in documentation that you are financially solvent to repay the home loan. Common documents include personal bank statement, tax clearance certificate etc.
How much loan amount can I receive?
Non- banking financial institutions can provide up to 70% of the real estate property value and you are required to pay 30% from your own equity. Banking institutions/ schedule banks, however, cannot disburse loan above Tk 1.2 crore, whatever the apartment value. In some cases loan amount can be more than 70%.
Do you require guarantee or cash security?
When applying for home loan, you should ask whether the financier requires any personal guarantee or cash security. This is the amount that a financier may ask of you as security in case you default.
Can I transfer loan from your bank to another one?
After you have taken loan from one financier, you may find that a competitor has lowered their interest rate. In that case you may want to transfer the home loan to that financier. It is best to ask beforehand if your financier will allow this transfer and what are the formalities and costs involved to do so.
Do you provide monthly or yearly statement on loan repayment?
You should ask your financier if they provide monthly or annual statements on how much of the loan amount you have paid back in principal and interest. This way, you will have an idea of how much you have paid back and how much remains outstanding.
What are my undertakings as an apartment buyer in the Tripartite Agreement?
This agreement is signed before loan disbursement when buying an apartment. The agreement involves three parties- you, the developer company and the financier of your home loan. Your main undertakings will be to:
- complete registration, mutation of property on specified time
- pay EMI regularly
- authorize the developer company to handover registered deed of sale with original receipt of registration directly to your financier after registering the apartment.
- authorize the developer company to repay entire loan together with any overdue interest/ and or charges accrued on the borrowed amount in case of default.
If you are a first-time home buyer, you might be tempted to go with the first financier that you come across, but since your dream home hinges upon the financial arrangement, it is best to shop around and select the home loan that is ideal for you. You should also check if they have tie-ups with reputed developer companies of Bangladesh. In that case the loan application process may be less time consuming if you buy an apartment from a reputed developer company.