There is no denying that investing in a home is one of the best investments. With real estate marketing being at an all time peak right now, many people are now getting interested in investing in a property more than ever. As much as people are interested in buying a ready apartment, there is a new method of investing in a property by building a home of their dream from scratch is also gaining popularity. But the construction of a home could be quite expensive than just buying a ready apartment. But the good news is, there are quite a few financial institutions that are providing construction loans to lenders.
What is a Construction Loan
Before we proceed any further, you should understand what a construction loan is. A construction loan is a type of short-term financing that can be used to cover the costs of building a house from beginning to end. Construction loans may be used to cover the costs of purchasing land, creating plans, obtaining permits, and paying for labor and materials.
How Does it Work
Construction loans allow future homeowners to borrow money to buy building materials and pay for labor. This money is also used to purchase the land on which you will be building. If you already own the property, you may be able to use it as collateral for your loan. Construction loans are typically issued for a period of 12 to 18 months because they are intended to cover the building process. However, once construction is completed, some loans automatically convert to a permanent mortgage.
How Popular is Construction Loan in Bangladesh
Out of the many different types of home loans, the concept of construction loan in Bangladesh has been there for a long time. However, it is popularly known here as a house building loan. But now many financial institutions are trying to maintain an international standard in terms of mortgages and home loans, so they are opting for categorizing different modes of financing.
Who is Eligible to Get Construction Loan
The criteria for being eligible for construction loan or house building loan are a little different than traditional home loan or mortgage. The criteria might vary from bank to bank. But the basics mostly cover criteria like,
- Working Professional (Minimum of 2 years of working experience)
- Land owners
- Age minimum 25 years and maximum 65 years.
Documents Required for Construction loan
- Passport/ Driving license, NID Card
- Salary slip of last 2 months
- Recent utility bill copy
- Bank account statement for last 2 months
However, one crucial point you need to remember is that you would only be eligible to get a maximum of 80% of the total expenses of your estimated construction plan from any of the financial institutions that offer construction loans.
Whether it is a home loan or construction loan, when planning to build your own home financial support from a third party could make the entire process a lot easier. So what are your thoughts on the concept of construction loan? Let us know in the comments below!