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Home Finance

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All you need to know about


It is everyone’s dream to one day own your own home, be it an apartment or a house. Fulfilling your dream to own a home can be made easy using Home Loans. Whether you want to change from a smaller home to a larger one, moving from renting to owning or just are looking to renovate your existing home.

Home Loans are offered to both salaried individuals and business owners ranging from PKR 300,000 to PKR-50 Million, up to Maximum 85% (this can vary from case to case and bank to bank) of Home Value with a tenure ranging for 3 years to 20 years.

Depending on what your goal is, most banks offer various products to handle that specific goal:

  • Buy a Home:  You use this type of Home Loan when you want to buy a specific property with a constructed home, such as an apartment.
  • Construct a Home: You can use this type of Home Loan when you own a property already but need the financing for construction.
  • Home Improvement: You can use this type of Home Loan when you already own a home and would like to upgrade or repair it.
  • Balance Transfer Facility: Balance Transfer Facility is when you change your Home Loan from one bank to another.

Islamic Banks in Pakistan also offer this facility. They use one of two models: Diminishing Musharka or Ijarah. In Diminishing Musharka, the bank becomes the co-owner of your home and you eventually buy out the bank over a period of time. In Ijarah the bank buys the home for you and you pay the bank back over a period of time. In both Islamic and Conventional options you should closely pay attention to the items mentioned in our Things to Know (hyperlink) and Beware! Sections (hyperlink).

Home Loan application require a thorough evaluation of your ability to repay the loan, go through the section below to ensure you have the best chance of secure a Home Loan.

Credit Appraisal

This is the process banks follow to judge your (eligibility) ability to repay your loan as well as your trustworthiness. There are different stages of a credit appraisal that you have to go through which vary from bank to bank.

Factors banks consider
  1. Income: You as the borrower have to prove your ability to repay the loan for which you’ll need to submit documents regarding income, current assets, liabilities, education and experience etc. For the businessmen, banks will analyze the financial statements to see how the business has been faring for the past 2-3 years
  2. Debt Burden Ratio: Your eligibility is calculated by applying Debt Burden Ratio (DBR) this is typically restricted to 50% of your monthly income. That means, that you need around 45- 50% of your income for personal expenses. All fixed obligations including the home loan applied for are restricted to a maximum 50% of your gross monthly income.
  3. Credit History: Banks look into your credit history such as existing loan repayments, mishandled accounts or delinquent credit cards. This is checked through a database of past loans and repayments available with the State Bank of Pakistan and private databases.
  4. LTV: is also a factor in eligibility calculation. Banks finance up to 70-80% of the property value as evaluated by the bank’s evaluator. For those who have not yet decided on the property, there is an option to sanction an in-principle amount, which helps to know the amount a bank would be able to give out.
How to increase your eligibility
  1. Clubbing income- Income of your spouse also can be considered if applied jointly.
  2. Increasing Tenure- Higher tenures will increase the likelihood for qualifying for the Loan
  3. Additional Income –Your consistent additional incomes like rental income qualify.
  4. Pre-closure of Existing Loans- Prepay the existing loans such as Car Loan or Personal Loans in full or part will help.
  5. Bank approved Employer – Check with the banks if there are any schemes running with your employer. Banks usually categorize companies into A, B, C based on company profiles and run different schemes like special interest rates, processing fee waiver etc. People working in MNCs can benefit from this.
6 Things You Should Know About
  1. Loan Amount: The total amount of money lent to you by the bank for your Home Loan.
  2. Loan Tenure: The total duration of your Home Loan.
  3. Mark Up / Interest Rate: This is the percentage the bank will charge you on the loan amount you will borrow on your Home Loan. There are two types of rates you can choose:
    1. Fixed Rate: In this case your Markup rate will remain the same during the tenure of your Home Loan.
    2. Variable Rate: In this case your Markup rate will be change every year based on the prevailing interest rate plus your banks margin.
  4. Monthly Payment: The monthly payments you will make to the bank to pay off your Home Loan.
  5. Property Insurance: This is the insurance of your home and is required for the tenure of your home loan.
  6. Life Insurance:  Some banks require you and your co-borrower to have life insurance, this varies from bank to bank.
Eligibility & Documentation

Eligibility for Home Finance varies from one bank to the other. However a basic framework of eligibility is as follows:

  •  Pakistani National Identity Card Holder
  • You should be aged  21 and 60 years of age
  • You should have income from any of the following sources:
    • Employment (Permanent/Contractual)
    • Business (Partnership/Proprietorship)

Every bank has their own set of internal policies which govern what documentation is required for Home Finance, below are a few items common to all banks:

  • Copy Of National Identity Card of Primary and Co borrowers
  • Photographs each of primary as well as co-borrowers
  • Property Documents
  • General income documents such as:
    • Income Statement
    • Salary slip
    • Bank statement
Why use CompareBanks

Getting a Home Loan is a major long term commitment. Before you sign up for one, you should make sure you have gotten the best deal possible. gives you all the information you need to make a decision that serves your needs best. You can quickly and easily compare rates, terms, and fees ensuring you get the Home Loan you want. Pro tip

Always remember, taking too many loans will restrict your credit worthiness. Keep your credit score in good shape by making consistent repayments of any Loans / bills.

  • Early Settlement charges: When you want to settle your Home Loan before your tenure is over, your bank will charge you a fee to avail this facility. Be sure that you know all the early settlement options with your sales representative before taking the loan.
  • Partial Payment Charges: You can also make partial payments against your loan; most banks have partial payment option in you pay part of the loan through a predefined policy. Whether this free of cost or charged varies from bank to bank, make sure you discuss this with your sales representative.
  • Application Processing Charges: This is a fixed onetime cost the bank will charge to process your application.
  • Late Payment: In case you miss your monthly payment’s due date, you will be charged a late payment fee.
  • Legal Fees: These are any legal fees that can arise, such as property documentation, transfer documentation etc. These fees are required to be paid before the loan is disbursed to you, make sure you know how much these charges are.
  • Make sure that you know and are ready to pay  these charges are taken before disbursement of the finance
  • Property Evaluation: In processing your case, the bank will evaluate the property you are interested in purchasing with your Home Loan. The bank will charge you for evaluating the property. Some banks conduct multiple appraisal on the property you wish to purchase make sure you discuss how much this will cost you.

Do I have to make any down payment for this loan?

Most banks provide financing of up to Maximum 85% of the value of your home. You will need to cover 15% of the value of the home. However this amount will be paid directly to the seller

Is it possible for two people to jointly apply for Home Finance?

You and a blood relative or your spouse can be co-borrowers for the Home Loan. Banks have the facility to add the income of the spouses to increase the finance amount

What do I have to pay in addition to mark-up on the loan?

You will have to pay processing charges, legal fees, Property evaluation charges, home insurance, and life insurance (If applicable).

How much time will it take to get payment against my loan?

The processing time differs from Bank to Bank usually your loan application can take 4 – 6 weeks to process, end to end.

How do I repay the loan?

You make your monthly payments through monthly instalments.

Can I settle my Home Loan early?

Yes, you can opt for early settlement; however, banks will charge you a fee in order to avail this facility. Make sure you discuss this with you Bank and are fully aware of the charges.

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