November 29, 2022

Thinking of a home loan but worried about the interest rate? Well, you are not alone. With the growing number of banks and financial organizations like DBH Finance, taking home loans has become easier.

However, you want the best interest rates against your home loan. That’s why you need to understand how a home loan works.

This article will give you a clear idea of home loan interest rates in Bangladesh with examples from different financial institutions.

What is a home loan?

Buying a home is a big decision, for sure. Not to mention, it requires a hefty amount of money. But with the help of a home loan, you can relax a little.

Generally, institutions that give us home loans could cover more than 70% of the cost. That’s a huge amount, right?

But you must make a large initial deposit to get the home loan. However, that’s not important here, as you’re concerned about the interest rate.

Let’s talk about that now.

What is the interest rate of a home loan?

Any loan you take for a specific purpose has an interest rate. Simply, interest is the extra money you pay the loan provider back against the loan. The same goes for a home loan.

While taking a home loan, your financial service will give you several conditions, and interest rates are one of them. Once you take a loan, you are supposed to pay it back at a time you and your financial service selected.

Furthermore, you do not just pay the main amount—you need to pay a little extra for the money. And that’ll be your interest rate for the home loan.

Different home loan interest rates in Bangladesh

As mentioned at the beginning, one can take a home loan from a bank or a non-bank institution. And it’s not hard to guess that different institutions will have varied conditions. If not too different, the interest rates often differ.

Below you’ll get an idea of some interest rates for some banks and non-bank institutions in Bangladesh.

Government banks’ home loan interest rate

  • Janata bank: 11%
  • Rupali bank: 9%
  • Agrani Bank: 6.5%
  • Bangladesh Development Bank: 6.25%
  • Sonali bank: 6.5%

Private banks’ home loan interest rate

  • Bank Asia: 9%
  • Bangladesh commerce bank: 9%
  • City bank: 8%
  • Dutch-Bangla Bank Limited: 8.5%
  • Eastern Bank Limited 9%

Non-bank institutions’ home loan interest rate

  • Delta BRAC Housing Finance (DBH): 11.99%
  • Meridian Finance: 11 to 13%

4 Benefits of taking a home loan

Although the interest rate seems pretty high, there are some benefits to taking a home loan. Here you go–

  1. The large amount is paid by banks/ nonbanks.

Banks or other financial institutions typically pay more than half for your housing. You will pay the rest. That’s known as a down payment.

As a result, you don’t have to wait longer to save money for a house and buy one.

  1. One name, many purposes

Generally, a home loan can be used for other purposes related to your residence.

For instance, you use a home loan to purchase land, build a new home on your land, buy a new home, purchase under-construction or used property, and so on. Furthermore, you utilize a home loan to renovate your house.

  1. Choosing the interest type

Sometimes, in the case of home loans, financial institutions offer two repayment types: fixed and floating interest rates.

If you choose a fixed repayment rate, your chosen financial service has given you one interest rate that will stay the same until the complete repayment. For example, if the interest rate is 9%,  it will be 9% throughout the time.

On the other hand, there’s a floating interest rate. In this plan, your bank will give you an interest rate that will fluctuate for inflation. Meaning your interest rate will change depending on the inflation rate.

Say you currently have a 9% interest rate for your home loan. Next month, the inflation gets higher, and your interest rate will decrease, for example– by 8%. Then again, if the inflation rate drops, your interest rate will be lower, like 8%.

  1. Flexibility in repayment duration

Another aspect that makes the home loan a good decision is that you will have a long time to pay off the debt. And it could be up to 30%.

You can pick the timeline. Know that selecting your monthly installment will reduce your monthly repayment.

For instance, if it’s a 3 years period, the interest rate is 8%, and your loan amount is 500000–roughly, you need to pay BDT 3000 per lakh.

Same way, if it’s for 5 years, your monthly payment per lakh will be lower than BDT 3000.

Concluding notes

Now that you have basic knowledge about home loan interest rates, you can make a well-informed decision. Check the bank and non-bank are available; call them or visit them for any confusion because taking a loan is serious. Also, make sure to compare the rates and other conditions.

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