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Mortgage Loan Procedure in Bangladesh

Finance or Bank Law Expert in Bangladesh

Capital raising is a very important part of investment, be it for business or for other purposes and in order to obtain mortgage loan, knowing the basics of mortgage loan procedures in Bangladesh is imperative. In Bangladesh, it is no different than any other parts of the world. Of course, ready capital is hard to come by, so a very common equalizer here is to avail the facility of mortgages. In order to make it more understandable and easier hire a bank or finance law experts in Bangladesh.

So, what are mortgages? Essentially in simple terms, it is the bestowing of the interest of one’s specific immoveable property to another party in exchange of financial capital which can be categorized as a debt or loan generally at a fixed interest rate. Once the amount has been paid back along with the requisite interests, the mortgaged property is released from the mortgagee, which is essentially the institution sanctioning the loan for the mortgagor who is receiving the loan against his/ her property.


Laws Relating to Mortgage Loan in Bangladesh

Now, mortgage facility is mainly provided by the banks as defined by the Bangladesh Bank Orders 1972. Also, in recent years the non-banking financial institutions created under the Financial Institutions Act 1993. have started playing their part in this market. Mostly, mortgaged properties include immoveable properties such as land, house or flats, shops etc. The idea behind it is of course if the mortgagor is unable to pay back the money with interest, the mortgagee will have the option of taking over that property or auctioning it off to recoup their invested funds. This also depends on the contractual understanding between the parties.

The leading law in Bangladesh regarding mortgage is the Transfer of Property Act (1882). This act defines what mortgage is along with mortgagor and mortgagee and how this transaction would be governed. The different kinds of mortgages are also defined in the act under Sections 58 (a-f) namely simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds. Fundamentally, the idea is the same however, these transactions take place in different orders in terms of transfer of interest of intended property.

The practical approach to mortgage is slightly different in Bangladesh. In countries like USA, the credit score is something which is considered when someone is willing to secure a mortgage. Bangladesh deals with it in a more archaic manner. All the documents are submitted to the banks, where the banks take clearance from the Bangladesh Bank on pending loans which is called a Credit Information Report or CIB which details out any loans the person has or any default the person has made in terms of loan payments. Also, another matter that is investigated is whether the property that is to be mortgaged has been mortgaged previously for other loans, which has still not been paid off.

Mortgage Loan Procedure and Requirements

In terms of the mortgagor securing the loans, there are certain requirements which need to be fulfilled. This is where professional legal assistance usually comes in handy for the mortgagor. There are some technical issues which need to be addressed and which helps prepare the mortgagor in terms of the type of loans they can expect to secure from the banks or NBFIs. It starts with the valuation report which lawyers can assist in preparing for the mortgagor. This particularly provides the mortgagor with an understanding of the value of the property and what kind of loan can be sanctioned.

Secondly, it is important to understand and have a clear idea about the title deeds and the documents related to the property. It is not a secret that in Bangladesh, the land registry is a rather challenging battle field when it comes to spotting the proper documents and ownership of the land. Usually the ownership over the previous twenty-five years are considered for any property. Thirdly, when there is an agreement between the  mortgagor and mortgagee along with the Power of Attorney with which the power or the interest on the property is transferred to the Mortgagee, these need to be drafted or vetted extremely carefully as it is important to realize that each party is not vesting through the mortgage anything more than they have agreed to. 

Finally, there lies the requirement of registration as anything related to property must be registered in Sub-registrar office to be valid. Notarization is also a necessity in this regard. These are all matters where a legal professional can actually ease the side of the mortgagor.

In conclusion, it is of paramount importance to understand the value of any property and the whole process through which it is being mortgaged as any mistakes or misunderstanding can lead to long term legal consequences and even loss of property. The mortgage law is fairly simple but the complexity lies in the practical approach of securing the mortgage.