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Home Loan

Types of Home Loan that Bank Provides in Nepal

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Everyone has a dream of living with their family in a home that they can call their own. It may take years to fulfill this dream if you are planning to build a home from your earnings. However, there are a number of banks that are ready to invest in your plan and fulfill your wish. You can now get home loan whether to buy a house or expand and renovate your old house. But you should always be clear about how much cash you have and how much debt you can afford. Nepal Rastra Bank has determined various categories of home loan. Thus, here is the list of various types of home loan that you can get from banks in Nepal.

Home Purchase Loan

Home purchase loan is one of the most common and popular types of home loan provided by the banks. Here banks and financial institutions provide loans for the purchase of a house or a flat. The banks provide home loans up to 50 percent of collateral valuation in the Kathmandu valley and up to 60 percent outside the Kathmandu valley. However, this amount should not be more than 15 million rupees.

If you are buying a house for the first time, the house should not be more than three thousand square feet. Also, you should live in that home after buying. The rent is not shown as a source of income for the first time buyers. Nepal Rastra Bank provides various facilities for the people who are buying a house for the first time. These customers can get up to 60 percent loan if they are buying a house in Kathmandu Valley. However, if you are buying a second home, it is called a business venture. You can also show the rent as a source of income.

Home Construction Loan

If you have your own land and are planning to build a house on it, the banks will give you a loan under the heading of ‘house construction loan’. You can get up to 50 percent of loan inside the valley and up to 60 percent outside the Kathmandu Valley on the basis of the land fair market value and estimated cost of the house.

At first, you have to show the estimated cost of the house you are going to build. Then, the bank calculates the average value by adding the fair market value of the land and the estimated cost of the house. You can get loan up to 60 percent of the same assessment available. If the estimated cost of the house you are going to build is within 50 percent of the average valuation, you can even get a loan up to 100 percent. However, this does not mean bank provides you 100 percent loan if you plan to construct a home anywhere in the country. The price of the land, the estimated cost of the house and your income determine how much loan you can get.

Land Purchase Loan

You can also get a loan from the bank, if you are planning to purchase a land. The banks provide 50 to 60 percent of the collateral valuation for those who plans to buy land. The loans are available for a period of five to 35 years. The maximum loan available is for rupees 1.5 crore. The interest on this loan will be the same as other home loans. However, you should build a house within a certain time in that land. Also, the bank should approve the product paper guidelines and send it to the Rastra Bank. Otherwise, buying a land counts as a real estate loan.

Home Extension and Maintenance Loan

Banks and financial institutions also provide home loans for home expansion, maintenance or improvement. You can take the loan to repair an old house and change the decor. If you have a one-storey house and want to add another floor, you can get a loan for that too. The bank will provide you a house extension loan if you have the approval of the concerned ward and a design made by an engineer with the estimated cost. The process of taking this loan is similar to that of a home loan as these loans also flow on the basis of collateral valuation, estimated expenses and income.

Pre-Approved Home Loan

This is a new type of home loan in Nepal. NMB Bank launched this pre-approved home where you don’t have to show any property in the bank. The process of getting the loan is similar to other home loans. Here, after you submit a proof of your income and other required documents, the bank will approve the loan and issue an ‘intimation letter’. You don’t have to show any collateral at the beginning. Within 90 days, the house / flat you have decided to buy can be mortgaged.

In the intimation letter, the bank specifies various criteria including where and how the house should be, and what market value of the land should be. If the property falls within that criteria, the bank gives the loan with a pledge. You can look for a house after getting an intimation letter in the bank.

Advance Home Loan

There is a trend of living in various housing and colonies in Nepal. If you want to live in these colonies but don’t have cash for booking, then you can get a loan too. You can get advance loan from banks where the developer themselves remains as guarantee. The banks also provide home loans under tripartite and quadrilateral agreements.

You can take a loan through a tripartite agreement between the developer, the buyer and the bank. In case the apartment is being developed without any investment. Also, the property is in the name of the developer during the construction period. The developer is responsible until the property is renamed. It is the responsibility of the customer to pay the interest on time.

Joint Home Loan

This is a type of home that can be lent collectively by more than one person at a time. Here you can take the loan jointly with a family member, including your spouse, parents and siblings. Most people take these kinds of loan for two reason. If one person’s income is not enough to pay the installment, or the loan period cannot be extended due to old age. This home loan solves the problems of the bank’s internal policy of giving loan if the last installment is of 60 to 70 years.

To get this loan, you need to open a joint account. The account requires full documentation from both parties. Also, both have to take responsibility if the loan is not paid on time or late. The bank pays attention to the income of both persons and the loan amount is little more than that for a single person.

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