Home Loans: Translating a House into Home in Nepal

A house is a sacred ideal of every family – it is a place where all the happy moments and the bitterness of life shared among the members of the family. This idea generally takes a whole lifetime to achieve. The good side, however, is that banks and other financial institutions step in to assist people to bring this aspiration come true through providing them with home loans. This guide provides an exposition of home loans in Nepal – their characteristics, uses and requirements are analyzed in detail.

What is a Home Loan?

A home loan is a type of loan offered by banks and other financial institutions to enable a person to buy, build, or improve their home. Home loans are secured against the property, the borrower purchases or builds. The conditions and terms of these loans may be different from institution to institution depending on the collateral income pool of the borrower, for instance, employment, business, or investment functions.

Home Loan Features in Nepal

Home loans in Nepal are characterized by the following features:

1. Areas of Application: One is required to extend a loan in order to purchase or build on land and buildings and there is no limitation on the construction of land and buildings as long as they demonstrate their ability to repay the loan.
2. Term of repayment: Loans are typically paid back over a set period in order to ensure smooth payments for the borrower. Most of the time quarters are the ideal choices, sequential payments are easy to handle and remember.
3. Time span of Payment: The span of time ranges up to 20 years maximum.
4. Lower Interest Rates: Starting in the year 2025, home loan interest do not exceed the 10 percent mark in a year.
5. Loan to Value Ratio – Collateral’s Fair Market value is the maximum limit that the banks have placed on their loan offering which is 70 Percent.
6. Construction Loan –There are some banks that are willing to cover up to a hundred percent of the construction cost however.
7. Loan amount - The person can obtain Rs 30 million loan for the purchase or construction of house in Nepal.

You can check the highlights of monetary policy for the fiscal year 2082/83 for detailed insights.

Home Loan in Nepal

Nepal has various banks and financial institutions that grant home loans for the following reasons:

1. Lands & Building Purchasing

These loans are granted to buy lands and buildings which include constructing new homes as well.

1. Houses and Apartments Buying

Loans for buying houses or apartments in urban settings are available for professionals and business persons looking to better their standard of living.

1. Buy Pre-Constructed Houses

Home loans are available for people with busy schedules to buy fully constructed typical houses.

1. Prepaid Home Loans

For home loans that borrowers have taken from other banks in Nepal, this country allows for refinancing options to be utilized however borrowers need to be aware of prepayment fees as stated and ruled by the Nepal Rastra Bank.

Housing Loan Terms in Nepal

Housing loans in Nepal have a maximum period of twenty years and this maximum depends on the income sources and credibility of the borrower. However, the loan cannot go beyond up to sixty percent of the fair value of the property, for instance the maximum ceiling cannot exceed approximately twelve million if the fair value is twenty million.

|Factors to consider Before Buying a Home in Nepal For the First Time While doing so, remember to check the following key requirements:

If you’re seeking to buy a house for the first time in Nepal, it is equipped with certain criteria which are as follows:

1. The property should be used for personal purposes.
2. The land set aside for the development does not go beyond 3000 square feet.
3. People who are buying for the first time should not have a previously acquired home loan from any bank.
4. The loan holders are not permitted to consider rental income as a legal source for loan servicing.
5. The following ratios will apply for Fixed asset values:

For value constituting land under 30 million NPR construction spending can garner about 80%.

Documents Required to Get A Home Loan in Nepal

The relevant paperwork is anything the candidate is required to complete as part of the application in order to disburse the loan in the form of a home loan in Nepal for interested candidates. The following are the relevant paperwork that is needed for a home loan in Nepal: 

Basic Requirements: KYC particulars CIC reports, PAN certificate. This is required where the loan amount is over NPR 2.5 million and not less than that. 

Additional Documents: Copies of citizenship certificates Relationship certificate of the applicant Renewed property registration certificates Articles of Association, or Memorandum of Association, or partnership deed, Multiple banking declaration, Net worth statement, NRB documentation checklist and Risk grading if required

For the first time home buyers especially specific official paperwork stating that there are no current home mortgages, are required. In the case of loan transfers, the statements from the previous mortgagee need to be submitted.

Property Related Documents

The applicant should provide the following documents related to the property for home loan in Nepal:

1. The line of Credit (LOC) and the tax paid document of the property
2. Ownership transfer deed
3. Property Documents (Rajinamapatra) and trace map
4. Four boundary Certificate which confirms the road access to the property
5. Approved building drawing map
6. Building Completion Certificate
7. Property Valuation Report issued by the approved valuator

Income Sources documents for the Home Loan

The applicant should provide the following documents related to the property for home loan in Nepal:

1. Appointment Letter and Salary certificate
2. Tax payment slip related to the income sources
3. Bank statement of the salary receipt or pension receipt
4. Rent agreement and tax paid in related to such income (rental income is not considered for first time home buyer)
5. Audited Financial Statement, Tax Clearance Certificate and Projected financial statement in case of income from business
6. Remittance should be receipt from the bank or remittance agent in case of income from foreign employment
7. Job contract or agreement in case of foreign employment with valid visa
8. Certification of agricultural income from competent authority

Security Related Documents for Home Loan

These are the required documents for the home loan related to the security:

1. Mortgage deed and roka letter in the name of the bank
2. Personal Guarantee of the borrowers
3. No objection Letter from the heir
4. Authority provided to the bank to debit the bank account
5. Insurance policy of the building in the name of bank
6. Other documents as required and demanded by the bank.

Conclusion:

A mortgage is one of the most important, if not the most important, financial decisions any person makes in the process of purchasing their dream home. By understanding the specific characteristics, objectives, and features of home loans in Nepal, not only the borrowers will be able to make the correct choice but the entire process of seeking the home loan will be expeditious too. From permanent residency to foreign investment immigrants, or even a refinance of a home loan, with the proper loan structure, anyone can step closer to sustainability and comfort.