The term “Mortgage Loan” is thrown around quite often during conversations associated with banking transactions. However, not many people are familiar with the exact meaning of said term and how different it is compared to other similar terms, especially “Mortgage Financing”. The main difference there is that while “Mortgage Financing” is strictly and exclusively associated with the purchase of Real Estate property, this is not the case with “Mortgage Loans”.
As such, in this article we shall be further explaining the definition of “Mortgage Loans” particularly in Egypt as well as clarifying the conditions that need to be met in order to secure one.
What is a Mortgage Loan?
It is basically a financial loan you would receive from a lender entity in exchange for mortgaging Real Estate property that you own. The loan agreement between both parties would typically constitute payment of the loan amount within an agreed upon time frame. During that time frame, the borrower may not have full control over the mortgaged properly and hence may not be able to engage in transactional activities such as selling or leasing. Full ownership of the property is re-instated to the borrower as soon as the full amount has been paid back. In case of failure to re-pay the full amount, the lender entity has the right to acquire ownership of the mortgaged Real Estate property.
Conditions to acquire a Mortgage Loan
Conditions may vary in Egypt from one lender entity or bank to another and the borrower’s degree of income is also a factor that influences these conditions. However, there are also some standard conditions that need to be met in all cases as per the below.
· Borrower should be at least 21 years old.
· The borrower must have full ownership of the mortgaged Real Estate property.
· The value of the mortgaged Real Estate property must be equivalent to the loan amount and in a sense that it should be enough to cover the loan amount in case the borrower was unable to pay back the full amount.
· The monthly income of the borrower must meet the requirements of the lender entity for approving the loan.
· The borrower will need to move his monthly income/payroll to the lender entity, especially if said entity is a bank.
· A financial tax is usually added at around 2% of the monthly payment amount if the borrower is late in paying the monthly installment.
· The bank or lender acquires the mortgaged property in the event that the borrower is unable to deliver agreed upon installment payments between both parties.
Mortgage Loan Procedures in Egypt
The borrower would apply for a financial loan against a mortgage of a property subject to his full ownership in Egypt and the application is then reviewed by the lender. In the event that the borrower’s application satisfies the required conditions and standards, and the borrower submits all the required documents, they would be eligible for a mortgage loan in accordance with the terms and conditions set by the lender. These terms and conditions would typically be associated with the loan amount relative to the borrower’s income rate as well as the interest rate due on the loan, the amount of the monthly installment, the duration of the loan repayment period, the possibility of expediting payments and installments, and whether the loan is decreasing or not. This is in addition to clarifying the penalties imposed on the borrower in the event of late payments, and other details under which the agreement between the two parties applies.
If the borrower agrees to these terms and conditions, the property that the borrower has applied for a loan will be mortgaged. This would revoke the borrower’s right to sell the property permanently or dispose of it without referring to the lender. That is of course, until the end of the loan repayment period and the release of the mortgage from the property.
Mortgage Loan Requirements in Egypt
The categories benefiting from the mortgage loan service in Egypt are divided into three main types:
· Employees with a fixed income/salary
· Self-employed personnel with variable income
· Entrepreneurs and business owners
Each of the above types further classified into 3 more sub-types
· Egyptians living in Egypt
· Egyptians residing abroad
· Foreigners residing in Egypt
Next, we shall go through the documents required to obtain a mortgage loan in Egypt according to each of the aforementioned categories and classifications.
Documents Required from Employees with a Fixed Income/Salary
Borrowers who are employees should submit all the following detailed requirements according to the categories listed separately to obtain a mortgage loan in Egypt.
Documents required from Egyptian employees living in Egypt
· A copy of the national ID card.
· A recent utility receipt associated with the place of residence at the time of submission of the application.
· A salary statement from the employer of the borrower.
· A Salary bank statement for the last 6 months which needs to be stamped by the bank.
· Evidence related to any other sources of income.
Documents required from Egyptian employees residing abroad
· A copy of the national ID card.
· A copy of the Passport.
· A copy of the residence document of the borrower in the country in which they reside.
· A recent utility receipt associated with the place of residence in Egypt, if any.
· Detailed proof of recent income in terms of value and job title. It needs to be stamped by the borrower’s employer and approved by the Egyptian consulate in the country in which the borrower resides and works.
· A salary bank statement for the last 6 months which needs to be stamped by the bank.
· Evidence related to any other sources of income.
Documents required from foreign employees residing in Egypt
· A copy of the Passport.
· A copy of the residence document of the borrower.
· A recent utility receipt associated with the place of residence in Egypt at the time of submitting the application.
· A salary statement from the employer of the borrower showing the total salary.
· A salary bank statement for the last 6 months which needs to be stamped by the bank.
· Evidence related to any other sources of income.
Documents Required from Self-Employed Personnel with Variable Income
Borrowers who are self-employed with variable income, should submit all the following detailed requirements according to the categories listed separately to obtain a mortgage loan in Egypt.
Documents required from self-employed Egyptians living in Egypt
· A copy of the national ID card.
· A recent utility receipt associated with the place of residence at the time of submission of the application.
· A recent utility receipt associated with the workplace at the time of submission of the transaction.
· A recent extract from the commercial register.
· A copy of the tax card.
· A copy of the company’s memorandum of association and the last amendment thereto or a copy of the company’s gazette.
· Original copies of the last three budgets approved by the Coalition Authority and the company
· Tax and social security certificates issued by chartered accountants.
· A certificate showing the monthly or annual income issued by a chartered accountant.
· A copy of the latest chartered accountant certificate and the latest certificate to practice the profession.
· The company’s account statement for the previous year stamped by the bank.
· Personal and original bank statement for the previous year stamped by the bank.
Documents required from self-employed Egyptians residing abroad
· A copy of the national ID card.
· A copy of the Passport.
· A copy of the residence document of the borrower in the country in which they reside.
· A recent utility receipt associated with the place of residence.
· A recent utility receipt associated with the workplace at the time of submission of the transaction.
· A copy of the tax card.
· A copy of the work permit and the certificate of practicing the profession.
· Representation of revenue, activity, and customer shares on a country-by-country basis.
· A bank statement stamped by the bank showing the customer’s income for a period of no less than one year in the country of residence.
· A statement stamped by the bank showing the banking activity or the movement of the borrower’s bank account for the previous year.
· Visa account statement for the past few months.
Documents required from self-employed foreigners residing in Egypt
· A copy of the Passport copy.
· A copy of the residence document of the borrower.
· A recent utility receipt associated with the place of residence in Egypt at the time of submitting the application.
· A recent utility receipt associated with the workplace at the time of submitting the transaction.
· A copy of the tax card.
· A copy of the work permit and the certificate of practicing the profession.
· Certificate of approval to pay taxes and social insurance, issued by a chartered accountant.
· A certificate showing the monthly or annual income, issued by a chartered accountant.
· A copy of the latest chartered accountant certificate and the latest certificate to practice the profession.
· The company’s account statement for the previous year, stamped by the bank.
· Personal and original bank statement for the last year, stamped by the bank.
· A statement stamped by the bank showing the banking activity or the movement of the borrower’s bank account for the previous year.
· Personal bank statement stamped by the bank showing the borrower’s income for a period of not less than one year
Documents Required from Entrepreneurs and Business Owners
Borrowers who entrepreneurs and/or business owners, should submit all the following detailed requirements according to the categories listed separately to obtain a mortgage loan in Egypt:
Documents required from Egyptian entrepreneurs and/or business owners living in Egypt
· A copy of the national ID card.
· A recent utility receipt associated with the place of residence at the time of submission of the application.
· A recent utility receipt associated with the workplace at the time of submission of the transaction.
· A recent extract from the commercial register.
· A copy of the tax card.
· A copy of the company’s memorandum of association and the last amendment thereto or a copy of the company’s Gazette.
· Original copies of the last three budgets approved by the Coalition Authority and the company.
· Tax and social security certificates issued by chartered accountants.
· A certificate showing the monthly or annual income issued by a chartered accountant.
· A copy of the latest chartered accountant certificate and the latest certificate to practice the profession.
· The company’s account statement for the last year stamped by the bank.
· Personal and original bank statement for the last year stamped by the bank.
Documents required from Egyptian entrepreneurs and/or business owners residing abroad
· A copy of the national ID card.
· A copy of the Passport.
· A copy of the residence document of the borrower in the country in which they reside.
· A recent utility receipt associated with the place of residence.
· A recent utility receipt associated with the workplace at the time of submission of the transaction.
· A copy of the tax card.
· A copy of the work permit and the certificate of practicing the profession.
· Representation of revenue, activity, and customer shares on a country-by-country basis.
· Bank statement stamped by the bank showing the borrower’s income for a period of not less than one year in the country of residence.
· A statement stamped by the bank showing the banking activity or the movement of the borrower’s bank account for the last year.
· Visa account statement for the past few months.
Documents required from foreign entrepreneurs and/or business owners residing in Egypt
· A copy of the Passport.
· A copy of the residence document of the borrower.
· A recent utility receipt associated with the place of residence in Egypt at the time of submitting the application.
· A recent utility receipt associated with the workplace at the time of submitting the application.
· A copy of the tax card.
· A copy of the work permit and the certificate of practicing the profession.
· A certificate of approval to pay taxes and social insurance issued by a chartered accountant.
· A certificate showing the monthly or annual income issued by a chartered accountant.
· A copy of the latest chartered accountant certificate and the latest certificate to practice the profession.
· The company’s account statement for the previous year stamped by the bank.
· Personal and original bank statement for the previous year stamped by the bank.
· A statement stamped by the bank showing the banking activity or the movement of the borrower’s bank account for the last year.
· Personal bank statement stamped by the bank showing the borrower’s income for a period of no less than one year.
With that, we conclude our comprehensive summary of mortgage loans in Egypt. If you require more information on the subject, we would be delighted to invite you to check out the Bayut Egypt platform where you can find all sorts of interesting and informative articles on this matter as well as various other topics
