The number of people who take advantage of home loans to buy a plot, house or apartment has increased significantly in the last year. This is primarily due to two reasons: 1. The markup rate for home loans has been reduced from 14.8% to 11.5% for properties valued between five and eight million. The markup rate for properties valued between one and five million remains unchanged and stands at eight percent.
2. As per the State Bank of Pakistan’s new regulations, home loans are now transferrable. This means that you can now buy a property even if the current owner has taken a loan to purchase it. If you purchase the property, you can either pay off the loan in full, or have the loan transferred in your name and pay the remaining installments.
If you are thinking about applying for a home loan to purchase a plot, house or apartment, keep the following in mind:
● To apply for a home loan, you must be a Pakistani citizen aged between 21 and 60. You must be employed or own your own business. For permanent employees, no minimum tenure of employment is required; if you are a contractual employee, you must be employed at your current place of work for at least three years.
● The maximum amount that can be financed by a bank is 85% of the market value of the property. The repayment period ranges between one and 25 years.
●Monthly installments cannot be higher than 40% of your net disposable income.
●It is the bank’s responsibility to ensure that all title documents are genuine; professional surveyors from the bank will evaluate the property value and assess the integrity of the relevant documents.
●If the monthly installments have not been met for six months, the bank has the right to confiscate the property and auction it to recover the loan.
By Shahzad Ghaffar. The writer is a Partner at Accounting & Tax Associates.