Home or land ownership is a big aspiration of everyone. Various financial institutions have been offering financial products like home financing solution to help you achieve this dream. Leading commercial banks like Global IME Bank offer various home loan schemes according to customers’ needs. These loans are particularly provided for purchasing or constructing residential properties like flats, land, or houses. But it is necessary to know the legal, technical, and financial criteria one needs to qualify for such loans. In this article, we will explain home loan eligibility, purpose, property-related legal terms, disbursement of the loan, and repayment of home loans.
Primary Objectives of Home Loans
Banks and financial institutions primarily consider the borrower’s income source and the valuation of the mortgaged property. The core objectives include:
Residential Land Purchase: For buying land to construct a residential building.
Purchase of Personal House/Apartment/Flat: For ready-made or under-construction houses, apartments, or flats.
Building Renovation/Refurbishment/Extension: For repairing, upgrading, or expanding existing residential structures.
House Construction: For building new residential properties.
Refinancing: To refinance or equity-finance previously purchased/constructed residential properties. This can also settle existing loans tied to the property.
Loan Swap: Transferring a home loan from one bank/financial institution to another. The new institution repays the outstanding balance, and the borrower services the loan to the new lender.
Property-Related Requirements
Properties pledged as collateral must meet these criteria:
Clear Legal Ownership: The property must have undisputed ownership and title.
Approvals and Permits: Construction must have all required government approvals and permits per prevailing laws.
Mandatory Setbacks: Compliance with mandatory distances from public utilities (e.g., power lines, rivers, highways, conservation zones) to prevent encumbrances.
Road Access: Direct motorable access to the land/building.
Loan Disbursement Criteria
Global IME Bank offers home loans under these limits:
- Land/Land-House Purchase: Up to 60% of Fair Market Value (FMV).
- Apartment Purchase: Up to 60% of the developer’s invoice value.
- Building Construction: Up to 100% of construction costs certified by a valuer, subject to a maximum Loan-to-Value (LTV) ratio of 60% of FMV.
- First Home Loan: Up to 70% of FMV or developer’s invoice value (eligibility as per Nepal Rastra Bank guidelines).
- Loan Swap: Up to 100% of the principal amount, subject to LTV limits.
- A Completion Certificate (Nirman Sampanna) from relevant authorities must be submitted to the bank post-construction.
- First-Time Home Buyer Eligibility
- First-time buyers enjoy an LTV ratio of up to 70% of FMV or the developer’s invoice value, subject to:
- Property for personal residential use (≤3,000 sq. ft.).
- Self-declaration and CICL report confirming no prior home/apartment loans.
- Rental income not considered for repayment capacity.
- Loan cap: ≤ NPR 2 crore.
- Debt-to-Income Ratio: Equated Monthly Installment (EMI) or Quarterly Installment (EQI) must not exceed 70% of the borrower’s total income (per Nepal Rastra Bank guidelines).
Conclusion
Home loans are vital for realizing homeownership dreams. Considering the above eligibility, goals, terms, and repayment policies helps borrowers to quickly find appropriate loans by means of bank or financial institution consultations. See a nearby branch or their website for specifics on programs including Global IME Bank’s “Nischchint Aawas Yojana,” and “Global Green Home Loan,” which supports environmentally friendly building.
Disclaimer: This guide provides general information about the home loan process in Nepal based on common banking practices. Interest rates, fees, specific requirements, and policies can vary significantly between financial institutions, market conditions and are subject to change. Please consult directly with your bank employee/Relationship Manager for the most accurate, current, and personalized advice before making any financial decisions.
