How to take Mortgage loan in Bangladesh | Everything you need to know in 2022

11 Jan 2022

Barrister Tahmidur Rahman Best Lawyer In Bangladesh

Tahmidur Rahman, Director and Senior Associate

Here in this post Barrister Tahmidur Rahman will explain in details about the basics of mortgage loan procedures in Bangladesh– How to take Mortgage loans in Bangladesh in 2022 as a company or as an individual for capital raising. Here in this post, in simple steps we explain the Procedure & Guidelines for the required approval of mortgage loans by Bangladeshi Companies and individuals.

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1) How to take Mortgage loan in Bangladesh | Everything you need to know in 2022

Mortgage in Bangladesh

A mortgage is a transfer of an interest in real estate or immovable property. One person lends his or her property to another in exchange for money for a set period of time.

The loan can be taken out on tangible immovable property. In the event of a repayment default, the person holding the mortgaged property may sell or use the property to make up for his loss.

The transaction conditions are determined by the parties; for example, when one person lends money to another, he may do so without requiring any security or may require some security for the payment of money.

The person who lent the money may then sue for repayment if there was no security taken. And, if security is taken, that security may be used to recoup the lost money.

Hence, the definitions:

Mortgagor: In a property mortgage transaction, the mortgagor is the person who borrows money instead of putting a mortgage on the property as security for the debt.

Mortgagee: The person lending money in a mortgage transaction is known as the mortgagee. A bank or other financial institution.

 

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Analysis of Mortgage Loan in Bangladesh

 

Amongst clients, the concepts of mortgage and pledge are frequently confused; however, there is a significant difference between the two. When a loan is pledged, it is secured against movable property, whereas a mortgage is secured against immovable property.

Mortgage transactions can be traced back to the early days when there was no mortgage law and people were still carrying out this type of transaction. With or without specific laws, this practice is universally accepted.

Prior to 1882, there was no specific law governing mortgage property transactions. Following the passage of the Transfer of Property Act, the rights and liabilities, laws governing mortgage, mortgagee, and mortgagor underwent a thorough and much-needed revision, and detailed regulations were enacted.

Prior to the 1882 Act, though the act did not apply to previous transactions, a mortgagor’s right to redemption existed to recoup the mortgage money.

Mortgage Loan related laws in Bangladesh

As per the Bangladesh Bank Orders of 1972, banks now serve as the primary providers of mortgage facilities. Additionally, non-banking financial institutions established in accordance with the Financial Institutions Act of 1993 have begun to participate in this market.

The majority of mortgaged properties are immovable, such as land, homes, apartments, businesses, etc. Of course, the concept is that if the borrower is unable to repay the loan with interest, the mortgagee will have the option of seizing the property or selling it at auction to recuperate their investment.

The parties’ contractual agreement will also have an impact on this. Despite this, the Transfer of Property Act continues to be the primary mortgage law in Bangladesh (1882).

This law establishes the definition of a mortgage, the roles of the mortgagor and mortgagee, and the rules that apply to this transaction. Sections 58(a) to (f) of the act define the various types of mortgages, including simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, and mortgage by deposit of title-deeds.

Although the basic concept is the same, these transactions happen in a different order in terms of the transfer of ownership of the desired property.

In Bangladesh, the practical approach to mortgage is slightly different. When applying for a mortgage in countries such as the United States, the credit score is taken into account.

Bangladesh handles it in a more traditional manner. All of the documents are submitted to the banks, and the banks obtain clearance from the Bangladesh Bank on pending loans, which is known as a Credit Information Report or CIB, which details any loans the person has or any loan payment defaults the person has made.

Another factor considered is whether the property to be mortgaged has previously been mortgaged for other loans that have yet to be paid off.

 

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    Mortgage Loan Procedure and Requirements in Bangladesh

    There are certain requirements that must be met by the mortgagor in order to secure the loans. For the mortgagor, this is usually where professional legal assistance comes in handy.

    There are some technical issues that must be addressed in order to prepare the mortgagor for the types of loans that can be obtained from banks or NBFIs.

    Firstly, It all starts with the valuation report, which lawyers can help the mortgagor prepare. This, in particular, provides the mortgagor with an understanding of the property’s value and the type of loan that can be approved.

     

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    Second, it is critical to comprehend and fully understand the title deeds and other property-related documents. It is no secret that in Bangladesh, the land registry is a difficult battleground when it comes to locating the proper documents and determining land ownership. For any property, the previous 25 years of ownership are usually taken into account.

    Third, when there is an agreement between the mortgagor and mortgagee, as well as the Power of Attorney, with which the power or interest in the property is transferred to the Mortgagee, these must be vetted extremely carefully because it is critical to understand that each party is not vesting anything more than they have agreed through the mortgage.

    Finally, registration is required because anything related to property must be registered in the Sub-registrar office in order to be valid. Notarization is also required in this case. All of these are situations in which a legal professional can help the mortgagor.

    To summarize, it is critical to understand the value of any property as well as the entire mortgage process, as any mistakes or misunderstandings can result in long-term legal consequences and even property loss. The mortgage law is fairly straightforward, but the complexity lies in the practical approach to mortgage security.

    Mortgage Loan In Bangladesh

    Types of Mortgages in Bangladesh

    Simple Mortgage

    A simple mortgage is when a mortgagor agrees to pay the mortgage money according to the loan documents or gives the mortgagee the right to sell the property and apply the proceeds to the mortgagor’s loan. The mortgagee does not have possession of the property in a simple mortgage.

    Conditional Sale Mortgage

    A conditional sale mortgage is one in which the mortgagor sells the mortgaged property to the mortgagee with a condition, with the sale becoming absolute in the event of a payment default. If the mortgage is not paid, the property becomes void according to the terms.

    Mortgage on Usufructuary Property

    The usufructuary mortgage occurs when a mortgagor gives the mortgagee possession of a property and authorizes the mortgagee to keep possession of the property until the debt is paid. Typically, rent or profits from the property while in the mortgagee’s possession are applied in whole or in part to the debt.

    English Mortgage

    An English mortgage is when a mortgagor agrees to repay the loan on a specific date and transfer the property completely to the mortgagee, with the provision that the mortgagee will re-transfer the property to the mortgagor upon payment of the agreed-upon loan amount.

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    General Questions that people ask about Foreign Loans in Bangladesh

     

    FAQ

    What are the best banks for Mortgage loans in Bangladesh?

    It is very hard to pin down specifically the best banks for Mortgage loans in Bangladesh. Some of the mentionable ones are:
    Bengal Commercial Bank
    Midland Bank.
    LankaBangla Finance.
    Standard Chartered Bank.
    Delta BRAC Housing Finance Corporation Limited.

    What sort of Mortgages are applicable in Bangladesh?

    Sections 58 (a-f) of the act define the various types of mortgages, which include simple mortgages, mortgages by conditional sale, usufructuary mortgages, English mortgages, and mortgages by deposit of title-deeds.

    Who is the owner of a Mortgaged property in Bangladesh?

    The person who mortgages his property to secure the loan is referred to as the "mortgagor/borrower." The individual or institution to whom the property is mortgaged is referred to as the "Mortgagee/Lender."

    How many types of mortgages are there in Bangladesh?

    In Bangladesh, there are six different mortgage types, which are: simple mortgage, usufructuary mortgage, English mortgage, mortgage by conditional sale, mortgage by title deed deposit, and anomalous mortgages.

    Is giving Mortgage means a transfer of ownership?

    Mortgage has a very broad scope, ranging from giving parties rights to creating formalities for creating mortgages (section 59), as well as redemption clauses and their variants. Mortgage transactions are distinct from pledge, lease, and charge transactions. To determine whether a transaction is a mortgage or not, a test must be performed to determine whether the purpose of the transaction is enjoyment of property by the transferee or repayment of debt by the transferor. As a result, in the case of a mortgage, the latter part is the intention of the party. In mortgage transactions, there is no transfer of ownership; rather, there is a transfer of possession for a set period of time.

    Is Mortgage loan safe in Bangladesh?

    A mortgage loan is generally a secured way of availing loan in Bangladesh. This means you put up a property as collateral for a loan. This property serves as collateral for the lender until the loan is fully repaid. Monthly EMIs are used to repay the loan.

    What is the difference between loan and Mortgage in Bangladesh?

    A loan is a sum of money borrowed from a financial institution to meet specific objectives or requirements. It can be secured or collateral-free. A mortgage is an immovable property used as collateral to obtain a loan.

    Why is it called a Mortgage in Bangladesh?

    The term derives from the Old French morgage, which means "dead pledge," and is derived from mort (dead) and gage (pledge) (pledge). It is so named because the deal dies when the debt is paid or when payment fails, according to the online etymology dictionary.

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    Author’s Bio

    Tahmidur Rahman | Law Firm in Dhaka, Bangladesh

    Tahmidur Rahman is a trained Engineer and one of Bangladesh's most innovative young Barristers. He is regarded as one of the country's sharpest young legal experts.

    He is academically qualified Legal Professional (BA LLB) and CS Engineer (BSc CSE- concurrently pursued four different majors at two different universities) with experience structuring and negotiating complex business transactions such as company formations, registrations, mergers, acquisitions, leveraged buyouts, syndicated loans, and acquisition financings.

    For the past several years, I've been counseling corporations, investors, and banks on a wide range of capital markets products and financial restructurings, particularly in cross-border settings in rising South Asian markets. I like assisting clients in resolving complicated financial structure difficulties, dealing with difficult market conditions, and navigating Bangladeshi legislation, regulation, and disclosure requirements.

    As one of the the leading law firms in Bangladesh, Tahmidur Rahman Remura chamber aligns its way to consistently exceed the legal expectations from its revered local and International clients. Voted as the best Banking law firm in Bangladesh by ACQ, best Commercial law firm in Bangladesh by FT and best Company law firm in Bangladesh, in 2020 by several world class publications and databases, TLS law firm in Bangladesh is also considered as one of the best multi-disciplinary full service law firm in Dhaka, Bangladesh.

    The law chamber functions as a group of many leading practicing lawyers who work together to represent TLS's clients and have so far achieved an outstanding overall success rate in both litigation and commercial matters. The Lawyers and Barristers are working as partners, associates and paralegals of Tahmidur Rahman|TLS- Law Firm in Dhaka, Bangladesh.

    They are highly trained and exceptionally qualified with both local and international credentials and skills. The current Managing Partner, Barrister Abul Hashem has the experience of practicing in the Supreme court of Bangladesh for more than 15 years and was educated in England and was also called to the Bar of England & Wales as Barrister of the Honourable Lincoln's Inn Society. Partners and partners have extensive experience and skills in their respective fields of practice, ranging from Admiralty, Writ Matters, Business, Criminal and Private Law, Finance Law, Information Technology Law, Investment Law, Intellectual Property law, Divorce & Family Practice.

    The head office of the law firm is situated in the Gulshan 1 circle of Dhaka, which is considered to be the financial center of Bangladesh. The firm is strategically situated close to Gulshan 2 & Banani Commercial Areas and is easily accessible from Uttara, Dhanmondi, Bashundhara Residential Area and Badda. The firm works in compliance with strict ethical principles and maintains international standards in the handling of its business.

    Tahmidur also gained broad experiences in antitrust, consumer protection, and general litigation matters, with particular experience in FTC investigations, private antitrust litigation and class actions. Within short span of formation, Tahmidur also served several national and multinational corporations which includes Team Group Plc, Seecen International Ltd., Diplomate Resorts Plc, Cloudcone Technology PTE Ltd., Benaul the Piper etc.

    TLS as a firm also defends corporations in a wide variety of industries, including pharmaceutical and technology companies. Despite this exponential growth and proliferation of clients, the managing partner still constantly maintaining the firm’s grounded approach and making sure the members of ‘Tahmidur Rahman Remura’ maintain a contiguous and helping hand towards its clients of all norms.

    Email: [email protected]

    Address: Jamilla Villa (4th Floor Flat No-C2 House 4/A/1 Road no: 2, Gulshan 1, Dhaka, 1212, Gulshan, Dhaka, 1212, Bangladesh

    Gender: Male

    Job Title: Senior Associate and Director

    Commercial Law practice in TR Barristers in Bangladesh 

    The Barristers, Advocates, and lawyers at Remura Law chamber in Gulshan, Dhaka, Bangladesh are highly experienced at assisting clients in dealing with all sorts of Bank loans in Bangladesh.   For queries or legal assistance related to any type of commercial legal assistance, please reach the relevant law firm at:

    E-mail: [email protected]
    Phone: +8801847220062 or +8801779127165
    Jamilla Villa (4th Floor Flat No-C2 House 4/A/1 Road no: 2, Gulshan 1, Dhaka, 1212

     

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