Mortgages for purchasing real estate in Cambodia

Mortgages for purchasing real estate in Cambodia

As Cambodia is expected to sustain strong economic growth in the coming years, many buyers are confident in buying properties such as a home or are considering purchasing property for investment or as a second home. Mortgage facilities from banks for foreign purchasers help those buyers unable to put down 100 percent of a unit's asking price and many of them are taking out mortgages to finance their properties.

The procedures to get approval for a mortgage to buy or refinance a home are not complex. Borrowers seeking a loan these days will find more lenders to choose from and the market is considerably more liquid. Many residential developers have eased the requirements on loans for their projects with landed properties such as villas. These developers are providing loans and mortgages to their own clients. As I mentioned in my earlier articles, this will only increase the risk for buyers because if the owner becomes unemployed or loses their income, they will not be able to afford their house and eventually their house will end up being repossessed. 

On the other hand, not every buyer understands the fact that the longer the payment period, the higher the interest. There is a possibility that the accumulated interest on the loans itself in the long run (such as after paying 10 or 15 years) is equivalent, or exceeds the value of the home price. Still, it is better than paying rent on someone else’s house, which would be about the same amount as what you must pay to the bank every month. Of course, for cash-rich buyers, they can just pay the full price of the property as a ‘’once-off’’ to avoid wasting money on interest. 

However, many are complaining that the rates of interest in Cambodia for loans are very high compared to other countries. The interest on real estate loans can go up to as much as 10 percent per annum over the years. The high interest rate payments on these loan payments are putting additional pressures on many buyers, particularly those without a stable income. In general, property buyers are required to pay approximately 20 to 30 percent of the property’s total value before obtaining a loan. The term of the loan is usually 15 to 30 years. Other than banks, there are also microfinance institutions specialising in home loans and interest rates generally vary with higher loan rates compared to banks. 

Thanks to all these mortgage options available on the market, buyers are now able to afford a property. They don’t need to have sufficient savings to purchase a property outright. It is not difficult to obtain a bank loan if one has a clean credit record, a down-payment and can demonstrate proof of sufficient income. 

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