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Mortgage

Housing Finance Bank is making affordable housing a reality

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Yunus Babuwaire, the Senior Manager, Personal Banking at Housing Finance BankWith the Uganda Bureau of Statistics estimating that the housing deficit in Uganda is at 2.1 million units, experts have said that this situation needs urgent attention. The deficit is estimated to be highest in Kampala.

We caught up with Yunus Babuwaire, the Senior Manager, Personal Banking at Housing Finance Bank to explain the key interventions the Bank has put in place.  Below are the excerpts.

Qn: What does housing finance mean?

Housing finance can be defined as provision of credit to enable home ownership. At Housing Finance Bank we have expanded this scope to cover housing and its entire value chain.

Qn: What is Housing Finance Bank doing to help increase access to affordable housing?

Housing Finance has a wide range of solutions to assist Ugandans to meet all their housing needs. These include:

  1. Incremental housing which enables;
    • Construction in phases
    • Use of untitled land
    • Financing housing support services like; solar and water connection
  1. 100% financing – to purchase or complete your residential property, you can access up to 100% finance to enable you realize your dream.
  2. Partnership with developers of low-cost housing to build and sell affordable houses to Ugandans.
  3. Flexibility repayments options which include;
    • Grace period
    • Early loan redemption
    • Longer repayment periods

Qn: What kind of housing finance solutions does Housing Finance Bank provide?

We provide different housing finance solutions to cater for Ugandans in all income brackets including those in the diaspora. Our solutions range from purchasing land or incomplete houses to outrightly purchasing multiple units. These include:

  • Incremental loans Land Purchase
  • Land Purchase
  • Home Loans
  • Multi-unit purchase or construction
  • Equity release
  • Renovation

Qn: Please walk us through the process of applying for a home loan and what happens after you give me the loan.

We endeavor to make the loan application process as simple and straight forward as possible. All you have to do is follow the simple process below;

  • Approach the bank with your specific need.
  • Discuss the need with our relationship officers and get advised on a solution and the requirements.
  • Submit the requirements for assessment and approval and receive our offer.
  • When you accept our offer, then you can get your house or property and start paying our loan

Qn: What happens after?

We offer additional financial advisory services to help you make the right decisions on repayment and resolve any challenges if any.We also offer Insurance for the property.

Qn: The world today is filled with different uncertainties that can affect people’s ability to make payments. How does Housing Finance Bank protect borrowers in such cases?

We are always aware of uncertainties thatmight affect the ability of borrowers to make payments. In this case, we offer relief packages such as:

  • Moratoriums
  • Loan restructures

Qn: In what ways can government policy change to help increase access to affordable housing and housing finance.

  1. Review of tax regime in the housing sector and its raw materials.
  2. Legislation to provide laws that support growth of housing sector.
  3. Stimulate household income to improve demand by ensuring stable economic growth.
  4. Building a good regulatory frame work that boast investment in the housing sector.
  5. Review Tax regime to reduce the cost of acquiring and owning a home. This can include reducing the high stamp duty taxes and reviewing the rental income tax.
  6. Government can also improve infrastructure, road network, Water and electricity supply which will in turn increase the suitability of more affordable land in places out of Kampala.
  7. Finally, we need to automate the lands system.

Qn: How is the housing finance Baraza conversation helping to advance your role as the leader in providing housing finance solutions in Uganda?

The Housing Finance Baraza has created a platform to interact with key players in the housing value chain such as Architects, Developers, suppliers and manufactures of construction materials, Engineers, Financiers/ Banks ,insurance companies and many other stakeholders with a common goal of providing affordable houses.

The Baraza also creates awareness on the different affordable housing solution both in terms of financing and availability of houses both to our local and international market to enable customer make cost effective decisions on acquiring affordable housing.

Everything you need to know about the Housing Finance Bank mortgage

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What is mortgage?

A Mortgage in legal terms refers to ‘the conveyance of title (legal or equitable interest) in real property by borrower to lender for repayment of money or loan. Which simply means that; A Housing Finance Bank Ltd. mortgage is an agreement in which money is lent to a borrower, for home construction, or purchase, buying urban plots or commercial property, using that very property as security.

How do I qualify for a loan?

It is easy all you need is:

  • Have an account with us
  • Ascertainable monthly income
  • Have copy of the land title
  • Copy of approved building plans
  • Bills of quantities of outstanding work
  • Photographs of four elevations of the building

For more information on the various types of loans.

Must I have an account with you to qualify for a loan?

Yes, you must have a savings account with us before you qualify for the loan. The account must also hold at least the equivalent of one instalment of your loan repayment as minimum balance for you to qualify for any of our mortgages.

What sort of properties do you finance?

The property must have a valid land title and building plans with local authority approval Construction must be in permanent materials and the buildings serviced /to be serviced with water and electricity.

Who is eligible?

To be sure that your mortgage is affordable, the amount we lend you must have a monthly repayment not exceeding 35% of your ascertainable income for mortages and 40% for the swift loan. Where your regular income is not sufficient, additional security may be required.

The applicant may be a Ugandan resident or non-resident. The residents may be individuals, companies, and joint applicants such as couples and or employees of corporate organisations. For joint applicants, joint incomes or cash flows are considered and the property title is registered jointly.

Employees of corporate organisations are covered under the Corporate Staff Mortgage

Ugandans living and working in the diaspora must:

  • Appoint an attorney at home
  • Submit a letter from the employer
  • Duly complete, sign and notarise the application forms
  • Attach notarised passport photos
  • Post them to Housing Finance Bank

Self-employed individuals will be required to submit audited accounts for the last two financial years together with business particulars such as Memorandum and Articles of Association, Certificate of Incorporation, and Company returns.

What about the loan size?

Currently, we loan a minimum of Uganda Shs. 5million, depending on the property location and value. The loan available will not exceed 70% for residential units in Kampala, 60% for urban plot and 50% residential units in other towns, of the property value as given by our valuer.

How long does it take to repay the loan?

It will take you up to 20 years to repay the mortgage loan in case of a housing mortgage, 5 years in case of an urban plot, and 10 years for commercial properties

What security do i need?

We take a first legal mortgage on the financed property. We also insure the property against fire and other forms of damage at your cost.

What are your interest rates?

Our interest rates are determined by the market conditions and HFB’s source of funds. Currently our rates are 16% p.a for residential Units and 18% for commercial units and urban plots.

Do I pay any other costs?

On application you pay application and valuation fees. You will also meet the costs of preparing and registering the mortgage.

What happens in case I lose my job?

We would like to maintain a client relationship with you at all times. It would therefore be very important for you to communicate consistently with us and let us know about your loss of job or any other financial strain so that our professional staff can offer you timely advise.

What happens in case of change of employment?

In case of change of employment we would expect you to communicate to us and let us know about your new employment so that the necessary arrangements can be done to enable you avoid arrears and make payment easier for you.

In the event that I die does housing finance take my house?

Not necessarily. When you undertake a mortgage you have made a big decision and this means that you must have the responsibility to plan for eventualities such as death. The bank takes necessary precaution to ensure that this does not happen by doing the following:

  • Encouraging mortgagors to write wills. In the event of death, therefore, the administrator has legal powers to pay back the mortgage on behalf of the deceased.
  • We also encourage people to get mortgage protection insurance and life insurance policies, which cover death and total disability.

What is a Swift Loan?

Swift Loan is a personal loan extended to salary earners and may be used to purchase vehicles, furniture, pay school fees and meet any other personal needs.

Where is HFB’s Head office?

The head Office is Located on Plot 4 Wampewo Avenue in Kololo. Telephone: +256- 414- 259651/2

How the Housing Finance Bank mortgage works

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What the purpose of the mortgage is:

Construction, purchase, extension or improvement of residential & commercial residential properties, and purchase of plots in urban areas within Kampala and its suburbs.

Eligibility:

To be sure that your mortgage is affordable, the amount we lend you must have a monthly repayment amount not exceeding 35% of your ascertainable monthly income. Where your regular income is not sufficient, additional security may be required.

The Company will confirm stated income with your employer.

The self-employed will be required to submit audited accounts for the last two financial years together with business particulars e.g. Memorandum and Articles of Association, Certificate of Incorporation, and Company Returns.

Property:

The property must have a valid land title and building plans with local authority approval. Construction must be in permanent materials and the building serviced/to be serviced with water and electricity.

Loan Size:

Currently, minimum of Ug Shs. 5million property, depending on the property location and value. The loan available will not exceed 70% for construction of residential units in Kampala, 80% for purchase of property within Kampala, 60% for an urban plot loan this shouldn’t exceed 80 million,60% for equity release loans of the property value as given by our valuer and Maximum 30 million shs for Growing house.

Repayment Term:

Not exceeding 20 years for residential units, and commercial residential properties and 5 years for urban plots and 10 yrs for growing house & equity release.10 years for dollar loans.

Interest Rate: Variable according to prevailing economic conditions.

Other Charges:

On application, you pay a non-refundable application fee of 0.25% of Loan amount applied but minimum is 200,000/=

Title search fee: – 50,000/= and Opening of boundaries: – 200,000/=.

Valuation and inspection fees will be as follows on submission of the application form: 400,000/= for properties whose value is below 500million, 800,000/= for properties whose value exceeds 500m but less than 1billion and 0. 1% of value for properties whose value is beyond 1 billion.

Facility fee – 1.25% of loan amount

You will also meet the costs of preparing and registering the mortgage e.g. stamp duty 1% on market value on transfer for property purchase and 0.5% stamp duty on mortgage and External laywers fees 413,000/=

Security:

We take a first legal mortgage on the financed property. We also insure the property against fire and other forms of damage at your cost.

Repayment Method:

Through equal monthly installments you repay the amount originally borrowed plus interest and insurance premium. In case of property purchase, the first repayment falls due on the first month following disbursement date. For properties in course of construction, the first repayment falls on the first day of the month following the expiry of eight months construction period commencing on the date of the first advance.

Note: These are general guidelines and are subject to change depending on the prevailing conditions. We are ready to discuss your needs on an individual basis.

Please come with the following:

Copy of the valid land title.
Copy of the approved building plans.
Bills of quantities of the outstanding work.
Photographs of at least four elevations of the building.
Proof of borrower’s income.
4 passport size photographs.
Identification documents (either a copy of Employer Identity card, Driving permit or a copy of the passport or a voters’ card.) This also applys to Spouses, Gurantors & people given Power of Attorney.
Copy of the sales agreement with details of the property or Sale offer.
Open a Current Account.
Fill in the Credit Reference Bureau Form for clients who don’t have financial cards.
Applicants to provide statutory declarations in lieu of marriage. This is in regards to legal requirements relating to mortgaging matrimonial property. Even if property is not matrimonial, applicant and spouse must provide a statutory declaration.
Ground rent receipts for purchase loans on lease properties.
Income tax clearance certificate
For persons self-employed:

A CompanyAudited financial statements for the past two years,
A certificate of incorporation
Memorandum and articles of association.
Company’s form 7
Bank Statements for 2 years
Sole Proprietors
A certificate of registration, Statement of Particulars & Audited books of accounts & bank statements for 2 yr
Or Tenancy Agreements with a photocopy of title attached.
For Ugandans working and living in the diaspora the following documents must be notarised:

Application form.
Powers of attorney.
Sale agreement.
Spouses details ie 2 passport photo’s & copy of identification
Vendor or sellers’ requirements;

2 paasport photo’s
Details of spouse ie passport photos+ ID
Copy of identification
Note: Please note that for purchase cases we don’t accept powers of attorney from vendors. And at the time of disbursing funds, the funds will be disbursed to the Vendors account.

How to get started with the Housing Finance Bank mortgage

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Some of the requirements needed before you can apply for a mortgage include:

  • Copy of a valid land title
  • Copy of approved building plans
  • Bills of quantities of the outstanding work (in case of construction)
  • Photographs of at least four elevations of the building
  • Copy of a sale agreement (in case of purchase)
  • Environmental impact Assessment report from National Environmental Authority ( NEMA) for projects of UGX 1 billion and above

Proof of borrower’s income

  • Letter from employer if self employed, pay slip for the last 2 month or a Bank statement for the last 12 months
  • Companies have to present audited financial statements, certificate of incorporation, memorandum and articles of Association, copy of Form 7 and a Bank statement of 2 years

Applicant’s details

  • Completed application form
  • Copy of financial card, valid ID and passport photos
  • Spousal consent or statutory declaration for marital status
  • Certified copies of Company founding documents (in case of self-employed applicants)