It is right that almost all the banks in Pakistan are now offering Home Finance facility. Bahria Town management also used to provide this facility but now they are not much interested in the matter. Any Developer is only interested to get money as much as he can and as early as he can. When homes are ready and sellers are also in the market then no one is interested in these issues. This facility is generally used when a new product/project is launched.
First of all you need to pay at least 30% of the home then bank will consider to finance for a home. The simple rule for getting a loan from any bank is that you need to prove from various ways (your past record) that you DO NOT (I repeat DO NOT) need any funds then bank will provide you funds.
I have studied this issue VERY closely and reached to a conclusion that:
1. There is no difference in Islamic Home Financing or Commercial Home Financing. The Islamic branches will take more time and funds for making it Islami for us. Otherwise both are one and the same thing. The rate of Interest in Islamic finance is more than a Consumer banking. (It is NOT being discussed based on Sharia matters).
2. It will (at least) take 6 months to get approval. There will be too much documentation and verification problems that one will be doing this as a full time project.
3. You will be dealing with too many different agencies at the same time. The Developer or the owner of the house and the bank. If the home is ready then a developer or an owner will not remain waiting for your bank financing. They will certainly find some other buyer during this time.
4. The Bank or Home Finance Corporation will charge (at least Rs.100,000/= if the home is of price Rs.30 lac. These hidden charges will be taken step by step (but will never be mentioned in the start) before the final transfer of funds. The documentation charges, Registry of the property, Advocate and patwari fees, Insurance for the property as well insurance of person applying for a loan are main expenses.
5. If a developer is selling a home which is under construction, it will be a better choice to go for home financing. In this case a home will be safe if a bank approves its financing. Secondly the home will be ready until the loan is approved.
6. A person can apply a loan of an amount based on total monthly income on record not depending upon home price. On record monthly income is which can be proved from supported documents, like income tax paid, bank accounts, bank statements, credit cards, Salary statements in case of a salaried person etc. The formula in this regard is total monthly income multiplied by 36. If some one is getting Rs.50,000/= per month and it is proved from three different sources and he is living on same place for about a three years then he/she is eligible to apply for a loan of Rs.18 Lacs. And a bank may grant him a loan of Rs.15 Lac.
6. In short it is close to impossible to get a loan if some one is really in short of funds.
7. And if some one is able to get a loan then they will keep increasing interest rate every year. Moreover the monthly installment on a home financed amount of Rs.10 Lac will be about Rs.13,000/= nowadays. In this amount Rs.10,000/= approx. will be deducted for banks interest and only Rs.3,000/= will be adjusted against the loan. Meaning if you pay back Rs. One lac to the bank in monthly installments then only Rs.20,000/= will be adjusted to loan granted.
8. If you are lucky enough to pay back the full amount to bank and want to free hold your property then this is not an easy task. They will ask you for a penalty for paying before time. They may take few months for finalizing the case so that some other INTEREST from monthly installments can be taken during this process.
======= Disclaimer: This is general information. Facts and Figures are produced here to understand the matter only. They may be different then actual the ones. ========
First of all you need to pay at least 30% of the home then bank will consider to finance for a home. The simple rule for getting a loan from any bank is that you need to prove from various ways (your past record) that you DO NOT (I repeat DO NOT) need any funds then bank will provide you funds.
I have studied this issue VERY closely and reached to a conclusion that:
1. There is no difference in Islamic Home Financing or Commercial Home Financing. The Islamic branches will take more time and funds for making it Islami for us. Otherwise both are one and the same thing. The rate of Interest in Islamic finance is more than a Consumer banking. (It is NOT being discussed based on Sharia matters).
2. It will (at least) take 6 months to get approval. There will be too much documentation and verification problems that one will be doing this as a full time project.
3. You will be dealing with too many different agencies at the same time. The Developer or the owner of the house and the bank. If the home is ready then a developer or an owner will not remain waiting for your bank financing. They will certainly find some other buyer during this time.
4. The Bank or Home Finance Corporation will charge (at least Rs.100,000/= if the home is of price Rs.30 lac. These hidden charges will be taken step by step (but will never be mentioned in the start) before the final transfer of funds. The documentation charges, Registry of the property, Advocate and patwari fees, Insurance for the property as well insurance of person applying for a loan are main expenses.
5. If a developer is selling a home which is under construction, it will be a better choice to go for home financing. In this case a home will be safe if a bank approves its financing. Secondly the home will be ready until the loan is approved.
6. A person can apply a loan of an amount based on total monthly income on record not depending upon home price. On record monthly income is which can be proved from supported documents, like income tax paid, bank accounts, bank statements, credit cards, Salary statements in case of a salaried person etc. The formula in this regard is total monthly income multiplied by 36. If some one is getting Rs.50,000/= per month and it is proved from three different sources and he is living on same place for about a three years then he/she is eligible to apply for a loan of Rs.18 Lacs. And a bank may grant him a loan of Rs.15 Lac.
6. In short it is close to impossible to get a loan if some one is really in short of funds.
7. And if some one is able to get a loan then they will keep increasing interest rate every year. Moreover the monthly installment on a home financed amount of Rs.10 Lac will be about Rs.13,000/= nowadays. In this amount Rs.10,000/= approx. will be deducted for banks interest and only Rs.3,000/= will be adjusted against the loan. Meaning if you pay back Rs. One lac to the bank in monthly installments then only Rs.20,000/= will be adjusted to loan granted.
8. If you are lucky enough to pay back the full amount to bank and want to free hold your property then this is not an easy task. They will ask you for a penalty for paying before time. They may take few months for finalizing the case so that some other INTEREST from monthly installments can be taken during this process.
======= Disclaimer: This is general information. Facts and Figures are produced here to understand the matter only. They may be different then actual the ones. ========
mirza baig replied Kaisrani Sahib, thank you for your input, appreciate your time. |
CMY replied Hussain Kaisrani sahib thanks for sharing very valuable information. I request more friends to please share their experience and knowledge with us. |
liaqat replied i agree with the difficulties in acquiring the loan as mentioned by mr hussain.but i would like to show the brighter side of the picture as well which is definitely missing in the article. i think only in Pakistan we can think about making a house with out taking a loan ,it does not happen any where else in the world,and when ever you obtain a fix instalment loan the money you are paying back in the beginning is mostly interest.and towards the end mostly towards loan. It has to be like that and it is like that until you make some formula of your own. But imagine if you are living in a rented house the money you are paying as rent is a complete waste.where as if you are paying the same money as interest of the loan you have taken to make your own home you are better off. 1, you have the pleasure of paying towards your own home. 2, you have the peace of mind,and no fear of being thrown out by the land lord 3, you don't have to worry about the raise in construction cost. I would like share my own experience when i had no money and i took loan to make my house I took rs 15 lac loan to complete the house and shifted there. i paid total rs 22 lacs instead of 15 in instalments over a period of seven years.if i had not completed and shifted in my own home i would have paid at least rs five lacs towards the rent in these seven years.and the house i completed in 15 lacs and cos ted me for 22 lacs was not possible to make even in rs 30 lacs after seven years since the cost of construction had gone up by more than double. So if i had not taken the loan and i had tried to save money.the same house would have cost ed me at least 35lac.since i would have paid 5 lac towards the rent and 30 lacs towards construction. And on that day i drew this formula, IF THE INFLATION RATE IS MORE THAN THE INTREST RATE YOU ARE SAVING BY TAKING LOAN. |
