Monday, March 4, 2013

A Look At How Construction Loan Works In Ghana

Nii House Plan

It wasn’t all that long ago that construction loans were introduce to the financial market in Ghana. This has enabled many people who otherwise have not been able to build—or even own—a home of their own to do just that. It has also presented more opportunities for foreign investors.

What Is A Construction Loan?

A construction loan in Ghana works in much the same way that it does in other countries and is considered temporary-to-permanent financing. Borrowers are approved for a certain amount of money prior to construction. They are then required to make interest-only payments on the amount of money that is spent during the construction phase for up to one year, or until the certificate of occupancy is issued by the building inspectorate. Once the home is complete, the balance due is rolled over into a 15 or 20 year mortgage. Borrowers are only required to apply for one loan, however, and only pay one set of closing costs.

Who Can Apply?

Applicants must be at least 18 years of age and be able to prove that they are credit worthy. Even if a person has already started the construction process, they can still apply for a construction/completion loan.

How To Apply?

There are five major financial institutions in Ghana that offer construction loans: CalBank, Fidelity Bank, Ghana Home Loans, HFC Bank and Stanbic Bank. While each one has its own slight variations in the application process, borrowers are typically required to provide the following information:
  • Two forms of personal identification.
  • Address verification.
  • Proof of income.
  • Three months of bank statements.
  • Valid life insurance policy.
  • Proof of land ownership.
Land ownership is often the most difficult thing to prove when applying for a construction loan in Ghana. If you need help doing so, you may want to consider contacting Ghana Homes Group. They employ full-time land lawyers who can research land and find titles that prove the land is not part of a communal trust.

What Are The Terms?

The borrower is typically required to make a down payment of at least 20 percent. Some financial institutions also allow borrowers to capitalize any upfront fees and charges to ease burden of the down payment. The terms of the loan are usually 15 years, although some banks offer 20 year mortgages. Only adjustable rate mortgages (ARM) are offered in Ghana.

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