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Home loan for your dream house
Securing a loan wisely can help you build a house
What you need to know:
You can either build the house using your savings, using a windfall income such as an inheritence or a retirement benefit, or by borrowing from the bank. Make sure to choose a form of home loan that suits your financial status.
Everyone dreams of owning residential properties, but not everyone can afford to own them. You can either build the house using your savings, using a windfall income such as an inheritence or a retirement benefit, or by borrowing from the bank. Make sure to choose a form of home loan that suits your financial status.
Why you may need it
Ms Victoria Najjuka Mukasa, the assistant senior customer relations officer of Housing Finance Bank Ltd says the purpose of the house loan is to construct, purchase, improve residential and commercial properties as well as purchase plots in urban areas within Kampala and its suburbs.
According to the personal and business package from Stanbic Bank, Uganda, home loans can be granted to one or more individuals, married couples, companies and informal bodies that may legally buy property in Uganda and have a proven source of income.
Home loan categories
Home Loans from Stanbic Bank are basically mortgage on residential properties and have different products:
• Ordinary Home Loan- purchasing a house.
• Home Improvement Loan- targets homeowners who would like to renovate and refurbish their houses.
• Completion Loan- enables one to complete a residential structure that they are already constructing.
• Re-finance/ Easy switch- used for buying out an existing home loan one may have with another lending institution, so as to take up better terms and service.
• Further advance- for existing Home Loan customers to make improvements on property.
• Re-advance- for existing Home Loan customers who, after repaying a portion of the Home Loan, would like to borrow all or part of the loan amount again.
• Access bond- This form of loan targets both financially astute customers and those with excess equity.
Categories of payment
Home loan payments vary, depending on one’s choice of home loan product and loan sources.
“To be sure your mortgage is affordable; the money the bank lends you must have a monthly repayment amount not exceeding 35 per cent of the individual’s ascertainable monthly income. Where your regular income is not sufficient, additional security may be required,” Mukasa says.
She says the property must have a valid land title and building plans with local authority approval. Construction must be in permanent materials and the building should be serviced with water and electricity. Mukasa notes that the repayment period does not exceed 20 years for residential units, and commercial properties. Payment for urban plots takes five years and 10 years for growing house and equity release.
“We insure the property against fire and other forms of damage at one’s cost,” Mukasa adds.
More packages
Housing Finance Bank Ltd also caters for Ugandans working and living in the Diaspora. Interested clients are required to submit an application form, passport photos, powers of attorney, letter from the employer, open a current account, sale agreement and consent by the vendor’s spouse supported by a confirmation from the LC 1.
If you want to buy a house, the bank contributes for you about 20 per cent with 80 per cent coming from you at an interest rate of 16 per cent. If it’s construction, then the bank comes in to support you when the house has reached a certain level.
Ms Joanita Sebikaari, the team leader of home loans personal and business banking at Stanbic Bank, says monthly repayment should not exceed 35 per cent of net salary income.
She adds that salaried clients should present; a letter from the employer, copy of contract and copies of three consecutive months pay slips, starting with the most recent. Non salaried clients should present audited accounts for two years of business and bank statements from the last one should also carry a registration certificate, company form showing directors and secretary, articles of association of the company, tax certificates and resolution to borrow.
CASE SCENARIO:If you earn Shs 1.5m and want a loan...
Assume you earn Shs1500,000 a month. In order to construct a house of Shs30m, you’d have to save about Shs500,000 per month for five years.
If you borrowed Shs30m in a lumpsum, at an interest rate of 17 per cent per annum, for 10 years, you could move into the house within 6 months and pay 521,393 per month.
Although your total payment will be higher than Shs30m, you will save money that you would have paid in a rant for the 5 years while saving for the house.
Where to ask about home loans
• Stanbic Bank, Uganda
Tel: +256-41 234710/11/13-24
+256-312 224 111/600
Fax: +256-41 231-116
• Dfcu Bank, Uganda
Tel + 256-414 351000
+ 256-414 237687
+ 256 - 312 300200
• Housing Finance Bank
+ 256 - 414259651/2
+ 256 - 414 255692/3
Home loan requirements
Home loan requirements vary, depending on the type of bank one approaches.
According to Ms Joanita Sebikaari, the team leader of home loans personal and business banking at Stanbic Bank, if one is interested in home loans, he/she must have the following.
• Proof of the borrower’s income
• A copy of valuation of property
• Tentative Sale Agreement
• Copy of approved plan
• Identification documents
• Six months bank statements for non Stanbic clients, and three months for Stanbic clients.
Acquiring a mortgage from Housing Finance Bank Ltd requires the following
• A copy of valid land title
• Bills of quantities of outstanding work
• Proof of the borrower’s income
• A copy of sales agreement with details of the property or sale offer
• Identification documents
• Two passport size photos
• Photographs of at least four elevations of the building.
Quick tips
• Do not borrow more than you need.
• Give accurate information during the application for the loan.
• Use the money for the right purpose- Do not buy a car instead of cement.
• Inform your bank if your circumstances change so that you can receive proper advice and support.
