Frequently Asked Questions (FAQ) about Home Finance or Bank
:pkf
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 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. ========
mirza baig replied on Sunday, September 7, 2008 11:47 AM PST
Kaisrani Sahib, thank you for your input, appreciate your time. |
CMY replied on Sunday, September 7, 2008 12:40 PM PST
Hussain Kaisrani sahib thanks for sharing very valuable information.
I request more friends to please share their experience and knowledge with us. |
liaqat replied on Sunday, September 7, 2008 03:14 PM PST
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. |
Habib replied on Sunday, September 7, 2008 04:56 PM PST
Loan is OK for most but interest rate is horrible these days some thing like 18 to 20%, In long term mortgage one may have to pay 3 times actual loan. so it is tricky thing, even sale of cars is also coming down due to same reasons |
Pardesi, Jeddah replied on Sunday, September 7, 2008 05:26 PM PST
Prudential formulas can be exchanged based on certain facts & figures but non of these can make up ideology of a Haram (interest) as Halal. That can only happen if a person has installed another mind in place of his heart; using minds in place of heart can resolve the equation. Dear brothers please give a second thought to your views before airing them.
Quran has labled this situation as an insane person stricken by the devil when he says, "Business (rent) & interest are the same".
The inflation is the reality, you have to face it while interest is Haram by all means. The resolution of the problem is to avoid Haram. This may create short-run problems but for those who think life beyond the boundaries of death remain calm & submit themselves to the Will of Allah.
Dear Liaqat, with most sincerity I wish to draw your kind attention to the issue & invite u to reconsider your thoughts. Even it does not sound appealing to you please do not SELL your ideas to others who might not be knowing the facts of the teachings of Quran & Sunnah & may fell in the ditch of Hellfire by only applying his minds to a situation which does require his heart & soul to be in command.
Still the choice is yours. |
Hassan replied on Sunday, September 7, 2008 06:28 PM PST
Pardesi bhai though you are absolutely right but the problem is that today we are living in a capitalist world, which says freedom of everything , religion aside.Very few people on the board will agree with your thoughts, though i perfectly do.To day nobody minds keeping money in the banks and taking interests, acquiring riba based loans, fixed deposits, etc.After the recent mortgage crisis in US, almost whole world is yearning to have equity based system.Today i don't have my own home, though i do have a plot.I have decided that i will only start construction of my house when i have saved enough money for that purpose.Would never go for loans.We never studied deen neither we teach to our children.We are only born muslims, we are not practicing muslims.Very few of us would have spent time in reading the translation of Quran and knowing what exactly Allah wants from us.It is a never ending topic but i would conclude by saying that religion can not be separated from the affairs of the state.If we call our state as an islamic state then the affairs of the state MUST run as per the teachings of Islam.There are divine laws and God is the law giver, head of the state is boud to implement these laws.He / she should not say that sharia laws are brutal.We should be very careful about our day to day affairs, and make sure that non of our acts contradict the Hukm of Allah.May Allah keep us safe from satan and guide us the right path. (Ammen) |
Pardesi, Jeddah replied on Sunday, September 7, 2008 08:44 PM PST
Ameen, Summa Ameen
Dear Hassan
I am pleased to see ur positive contribution. Your patience to get home will be appreciated in heavens. I am also facing the same issue. I am sure resisting the temptation of easy-way (riba based loan) not only pinches you but to all those who are even enjoing these loans; expenses aside.
Dear brothers, to me, a deep-down guilty-feeling at the bottom of your heart & the fear of Allah's Wrath are your only assets upon which you can rely; else are the stories & fairy-tales.
With the wisdom of your real assets inside, if you start learning even little about Quran & Sunnah, it is sufficient to live a contented life. |
Sultan replied on Sunday, September 7, 2008 09:46 PM PST
Hassan Sahib ! There is no doubt that times are difficult.But let me remind you they have never been easy anyway.Every era has its own "test" and no matter what they are it is equally difficult to succeed through them.If there were no tests and calamities how will we be tested?
Tundi-e-baade mukhalif sai na ghbra ai uqaab
Yeh to chalti hai tujhai ooncha urranai kai liyai |
liaqat replied on Sunday, September 7, 2008 10:26 PM PST
I am sorry pardesi bhai but this was written on the base of facts only.Insha Allah Allha is going to forgive me since i had no other choice for the shelter of my kids.please let me know if i can make my house halal now,i am sure there must be a way.You still have a choice and you can obtain loan from Islamic home finance as stated by Mr hussain,it is better to pay little extra and get it Islamic.may Allah give us the wisdom and guidance to under stand it better |
obs replied on Monday, September 8, 2008 12:07 AM PST
The world of 2008 is learning the hard way that "Interest" is causing a more economic hardship and meltdowns than previously thought. The recent financial crisis of major Investment banks appear to be the result of reckless leveraging made possible by interest based system. Had the lenders bothered to check the viability of funds, something they will do under Islamic lending, they would never have lent. Thus we see the mortgage crisis and inevstment banks going busts. One aspect of Islamic financing that needs to be worked out: availability of funds to poor / small borrowers. Up untill now, only rich borrowers seem to have access to Shariah compliant funding. |
An other Pardesi replied on Monday, September 8, 2008 12:17 AM PST
Dear Pardesi Sahib
I am very happy to know your views. I congratulate you to raise these points. However I would like to draw your attention to some other side also
Before going to my point I would like to clarify that I have never earned interest on my money and I never paid interest and I always wish not to enter a single cent to my home by the way of interest.
Logic is that if you stop interest you should have alternative halal means to fulfil the demand.
Islam gave the system of Sadqat and interest free loans. These things are absent from our society. We need Muslim financial intelligence to offer interest free solutions to combat capitalism.
I wish that there was a system to get interest free loan to build my home. Intellectual people like you should come to offer the solutions |
Pardesi, Jeddah replied on Monday, September 8, 2008 05:13 PM PST
Thanking you all I have some other facts presented in post 40027 as this has almost enlarged upto the next page. |