UGANDA, Kampala | Real Muloodi News | Back in 2001, Imelda Bahemuka was a resident of Kacwamba Trading Centre when a loans officer approached her to join a financial support group for women. Despite some initial hesitation, she ultimately decided to become a member.
Over time, she received approximately 10 loans from the group and established a track record of responsible borrowing. This success allowed her to secure additional funding, which she used to construct her own home.
“I used the money to construct two housing units; one completed and the other still under construction which now acts as my social security,” she shares.
Bahemuka is now a strong supporter of housing and home improvement loan policies, which have become increasingly popular in the real estate industry.
According to Boniface Kariyo, a loans officer at Housing Finance Bank, almost anyone can service a home loan, as long as they have a reliable source of income to make monthly payments. This source of income must be consistent and traceable for it to be used for credit financing.
“This source of income must be consistent and traceable for it to be used for credit financing,” says Kariyo.
Most salary earners are eligible for salary loans for home improvement, regardless of their salary level, which determines their instalment levels.
“A home loan can be used for either improvement or construction. Regardless of the purpose, it is calculated as instalments against one’s net income,” Kariyo says.
Home loans are different from mortgages, as they are simply bank loans used to purchase real estate.
In contrast, a mortgage is a legal agreement between the bank and the borrower that grants conditional ownership of the property.
Smith Niwamanya, a business banker at Bank of Africa says a home loan allows for home ownership, while with a mortgage, the lender can take possession of the home if the borrower is unable to continue making payments.
“Not all home loans are the same. Knowing what kind of loan is most appropriate for your situation will determine how much you get and terms of payment,” Smith says.
Before signing up for a home loan, it’s important to have a full budget drawn out to determine how much is needed.
“This quotation should be accompanied by employment documents. Thereafter an analysis of income and the request is done,” Smith says.
When considering a home loan, there are several factors to take into account, including the age of the applicant, their employer and work experience, and credit score.
Applicants should have an appointment letter, confirmation, work identity card, National ID, and a guarantor or recommender.
Banks also consider the employment contract and how long the applicant has been on the job, as well as the stability of the company.
“One should have worked for at least five years with a company that of good turnover and organised structures also considering how often they lay off employees,” Kariyo explains.
According to Rasmash Alele, a relationship manager at Equity Bank, if an applicant loses their job, the cause of the loss will determine whether they are eligible for insurance coverage.
“When you happen to lose your job due to unavoidable circumstances of permanent health or termination from restructuring, your insurance takes over,” Alele says.
Home loan instalments typically attract an interest fee of between 18-21%, depending on the bank’s rates. These rates may be subsidised for employees of institutions with a memorandum of understanding with the bank.
In conclusion, a home loan can offer a means to purchase real estate, land, or a fully furnished house, as long as the applicant has a reliable source of income, a good credit score, and a stable employment history.
Before signing up for a loan, it’s important to have a budget in place and to consider all the relevant factors that may impact loan eligibility.
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