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factors of housing loan rate in Cambodia

Home loans are one of the biggest loans among all types of loans in Cambodia. Therefore, not all financial institutions are able to offer such a huge loan. To obtain a home loan in Cambodia, home buyers have to pay more attention to understanding the entire concept of it. In this article, we’ll explain how home loans work and find some housing loan interest rates in Cambodia for your reference.

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Introduction

Owning a home is a dream for many, and in Cambodia, realizing this dream is not just a possibility but a tangible goal. The key to unlocking the doors of your dream home lies in understanding the housing loan rates. So, let’s begin on this journey together, exploring the housing loan rate in Cambodia and the avenues that lead to homeownership in Cambodia.

Understanding Housing Loan Rate In Cambodia

Fixed vs. Variable Rates: Navigating the Options

The housing loan rate in Cambodia can be categorized into two major sectors. One is a fixed interest rate, while another is a variable interest rate. When choosing a housing loan, you’re faced with the decision between fixed and variable interest rates. Fixed rates provide stability. No matter how long your tenure is, whether 25 years or 30 years, you only have to stick to the interest rate that was initially agreed on by both parties on the loan agreement. 

In contrast, variable rates are a new attractive home loan option to bring to the borrower. It offers flexibility but is subject to change. Variable rate indicates the interest rate will vary from time to time. It might go up or down, but it is mostly determined by the market itself unless the Cambodian government purposely regulates it in certain circumstances. It typically changes once a year in the Cambodian market. When interest rates go up, your repayment amount will also go up, so make sure you’re able to handle the fluctuation if you pick a variable rate. On the flip side, you will enjoy the privileges of less repayment when the interest rate is decreased.

There’s no best type of housing loan rate in Cambodia; there is only a suitable option for each individual. Review the pros and cons of fixed and variable housing loan rates in Cambodia with Khmer Prosperity Loan, and purchase a new home for your family with the right loan option that aligns with your financial plan.

the difference between fixed and variable mortgage

Factors Influencing Loan Rates

The interest rate is not just a number; it reflects all the things that happen locally, including economic conditions, government policies, and financial institutions’ profit from housing loan rates in Cambodia. Therefore, understanding Cambodian and global markets is beneficial for you to predict the home loan rates in Cambodia and choose the right time to acquire a property.

Types of Home Loans Offered by Banks

Before choosing an affordable housing loan rate in Cambodia to buy a new home, you have to understand the differentiation among different loan types. Don’t be in a rush to make a decision; follow Khmer Prosperity Loan and know the Cambodian market because there are many competitive interest rates for you to choose from.

There are two types of home loan packages, which are conventional and Islamic home financing. 

Conventional Mortgage Loans

A conventional home loan is a loan that is not backed by a government agency. This loan is purely lent by a customer with its own financial ability. Conventional home loan is also the most common loan type to buy a house in Cambodia. From the application stage to the disbursement step, only banks and borrowers are involved. The bank’s branch will determine the loan amount and loan size with the borrower’s financial status.

islamic finance vs conventional finance

Islamic Home Financing

Islamic home financing is invented because of Shariah compliance. In the traditional home loan, interest plays an important role in compensating the lender to lend their money to borrowers. However, payment of interest (riba) is forbidden (haram); therefore, a conventional mortgage would be a breach of Islamic beliefs. There are some important components in Islamic home financing compared to traditional home loans.

  • Musharakah: This is a joint venture or partnership where the bank and the customer contribute capital to purchase a property. Both parties share the risks and returns of the investment. The customer gradually buys out the bank’s share over time.
  • Ijara: This is a leasing agreement where the Islamic bank purchases the property and leases it to the customer. The customer makes regular lease payments and, over time, may have the option to purchase the property.
what is ijarah (islamic lease)
  • Murabaha: In a Murabaha transaction, the bank purchases the property on behalf of the customer and sells it to the customer at a marked-up price. The customer then pays the bank in installments.
  • Diminishing Musharakah: This is a variation of Musharakah where the ownership shares of the bank and the customer are defined at the outset. The customer gradually buys the bank’s share over time until they own the property outright.

For specific details about Islamic home financing in Cambodia, you may want to call our hotline. As a long-established loan provider, Khmer Prosperity Loan can clarify every loan clearly to you in a short meeting. 

Specialized Home Loan Products

Just as every home is unique, so are the financial needs of homebuyers. Banks offer specialized home loan products designed to address specific needs. Whether you’re a first-time buyer or looking to invest, these specialized products could be the key to unlocking your dream home.

Choosing the Right Bank to Apply 

Researching Bank Reputations: Trustworthy Partners on Your Journey

Selecting the right bank is an important stage as you want a trustworthy travel companion in your financing journey. Khmer Prosperity Loan also helps you to review the popular banks’ requirements and their interest rate. 

Comparing Interest Rates: Finding Your Financial Fit

A housing loan is a long-term loan in all banks. Any tiny term and condition difference will also cause big consequences and reflect while the period gets longer. 

Acleda Bank: 

Acleda Bank has more than 20 years of local banking in Cambodia. They have a strong reputation for providing different types of loans. Furthermore, they offer home loan sizes up to $300,000 but not more than 70% of the house price. In this case, the buyer needs to prepare a 30% down payment for the purchase. It is not an option for individuals but a must if you want to get home loan financing from Acleda Bank. 

For tenure conditions, Acleda Bank only offers a maximum of 15 years. The loan term is comparatively less than other bank institutions and loan providers. If you are looking to buy a new house with low monthly payments, then it will not be your first choice. A short repayment plan will lead to a high repayment term and might cause a default in the end.

Their interest rate is from 10% per annum and varies depending on borrowers’ profile.

CIMB Bank:

Unlike Acleda Bank, CIMB Bank is a foreign bank that operates in different countries. They’re one of the favorable home loan choices among all Cambodians due to the low-interest home loan services. Buying a house with CIMB Bank only requires paying a range from 5.5% to 7.5%. Besides, they offer up to 25 years of tenure financing to ease your burden. On the CIMB Bank website, you can see the state of the requirements clearly. 

Khmer Prosperity Loan:

Suppose you’re looking to get a convenient and fast home loan. Khmer Prosperity Loan is the best choice other than a bank institution. We offer a 6.99% low-interest rate for different types of loans, like SME loans and business loans. Please visit our branch or contact us online to learn more about how easy it is to get a loan in 24 hours with Khmer Prosperity Loan.

Evaluating Loan Terms and Conditions

Never only look for the interest rate, loan tenure, and principal amount. There are many terms and conditions you have to commit to before entering the loan application procedure. Check each loan provider’s requirements. For Acleda Bank, CIMB Bank, and Khmer Prosperity Loan, we require the borrower to be 18 years old or above Cambodian. 

Besides, Acleda Bank has a unique requirement, which is that the borrower must be employed by public organizations and national or international agencies. So, if you’re not one of them, Acleda Bank will not proceed with your loan application. To get a low housing loan rate in Cambodia with CIMB Bank, they require all house buyers to have annual fire insurance for the related property and renew it every year. 

In Khmer Prosperity Loan, we don’t set so many requirements for the borrowers. We want everything to be quick and easy, so we only request the borrower submit the appropriate document. No guarantor or any complicated requirement will be requested in your loan application.

Application Process For Cambodian

Assembling Your Financial Toolkit

Starting an application process requires a well-prepared financial toolkit. We will guide you through the necessary documents, ensuring you have everything at your fingertips to streamline the application process.

Credit Score Considerations: Building Your Financial Credit

the relationship between credit scores and interest rates

We’ve talked about the housing loan rate in Cambodia in the article, and you’ll find out there’s a range but not a static number. Do you think about what’s affecting the final interest that you get in the loan agreement? It’s your credit score. The higher the credit score the borrower has, the better the housing loan rate in Cambodia they can get. For example, CIMB Bank is offering a 5.55% to 7.55% housing loan rate in Cambodia. In the same setting of loan amount and personal profile, a bank institution will offer 5.55% to the applicant who has a full K-score, while another with a low K-score will get 7.55%. 

This way is not only applicable to Cambodian banks but also because of the concept of supply and demand. High credit scores mean quality borrowers perform well in their payment history and are less likely to have default loans.

Khmer Prosperity Loan does this in another way by fixing our interest rate at 6.99% for all loans like car loans. Therefore, you don’t have to worry about your bad credit score affecting the interest rate you get from us. Contact us today to apply for a home loan to purchase your dream home.

Pre-Approval Steps: A Green Light on Your Journey

Some banks not only offer low housing loan rates in Cambodia but also give them pre-approval. This is one of the common ways that banks usually gain high-quality borrowers. When the bank examination step is longer than that of their competitor, pre-approval can solve the time issue by offering an offer letter with certain terms and conditions. 

Negotiating Loan Terms and Loan Interest Rate: Additional Fee

Tips for Negotiating Interest Rates

Kscore is the main element that affects the interest rate, but there are still other useful methods to bargain for a better offer. We’ll equip you with valuable tips on how to negotiate interest rates, ensuring you secure a deal that aligns with your financial goals.

You can offer a potential co-borrower in your loan application as a chip to appeal for a lower housing loan rate in Cambodia. With a quality co-borrower, your payment ability is increased from a bank perspective. This method is applicable to guarantors as well. When banks feel more secure, they will provide a better offer to keep you as their customer.

Understanding Loan Repayment Options

The loan term is the length of repayment of the principal amount and interest rate. As we said, a long loan term can break down the big principal amount into a small repayment amount. Khmer Prosperity Loan suggests you use our free loan calculator to calculate the repayment amount within your financial ability. For example, a $100,000 home loan with a 10% interest rate can have a big difference between two tenures.

If you’re applying for 15 years, then the monthly payment is $1,074.61. In contrast, a 30-year home loan tenure can lower your monthly repayment to $877.57. A small option that you pick can decrease a $200 monthly expense on the home loan.

Risks and Challenges

Economic Fluctuations: Navigating the Financial Rollercoaster

Just as a rollercoaster has its ups and downs, the economy experiences fluctuations. We’ll discuss how economic changes can impact your housing loan rates, providing insights on navigating the financial rollercoaster with resilience.

Inflation Rates: High inflation rates can lead to higher home interest rates, as loan providers may adjust rates to maintain real returns.

Monetary Policy: Decisions made by the National Bank of Cambodia (NBC) regarding monetary policy, including changes in the benchmark interest rate, can directly affect home loan rates. Unlike personal loans, the home loan is affecting the price of all property in Cambodia.

Economic Growth: Strong economic growth may lead to higher interest rates to prevent overheating, while slow growth might result in lower rates to stimulate borrowing and spending.

economic cycle

Exchange Rates: Currency fluctuations can impact interest rates, especially if there is pressure on the Cambodian riel. A stable currency usually contributes to stable interest rates.

Global Economic Conditions: External factors, such as global economic conditions and trends, can affect Cambodia’s economy and, consequently, interest rates.

Government Policies: Changes in government policies, such as housing finance regulations or fiscal policies, can influence the cost and availability of housing loans. Legal financial institutions will have to stick with government policy in making any changes.

Political Stability: Political stability is important for economic confidence. Political instability or uncertainty can lead to higher interest rates as investors seek higher returns to compensate for perceived risks.

Consumer Confidence: The confidence of consumers in the economy can impact borrowing and spending patterns, influencing interest rates.

Global Interest Rates: Changes in global interest rates, especially in major economies, can have a spillover effect on Cambodia’s interest rates.

The creditworthiness of borrowers: The creditworthiness of borrowers and the overall health of the banking sector can influence lending practices and, subsequently, interest rates.

factors of housing loan rate in Cambodia

Tips for First-Time Homebuyers

Budgeting Advice: Crafting Your Financial Blueprint

Always plan within your budget. A default loan will lead you to bankruptcy, and it is recorded in all Cambodian banks. Without a proper reason, they will never provide you with loan financing in the following years.

Every journey has its challenges, and the path to homeownership is no exception. We’ll highlight common traps first-time homebuyers often encounter and provide guidance on how to navigate the new journey successfully.

Insufficient Research

Failing to thoroughly research and understand the different home loan products, interest rates, and terms offered by different financial institutions. You can easily solve this concern by comparing loan options from multiple lenders and carefully reviewing the terms and conditions before making a decision.

Ignoring Credit Score

Neglecting your credit score, as it plays a main role in determining the interest rate and loan approval,. Khmer Prosperity Loan has mentioned the importance of credit scores. Make sure to check and improve your credit score before applying for a loan. Higher credit scores often lead to more favorable loan terms.

Overlooking Hidden Costs

Cambodians are happy to get a home loan, but they forget to consider additional fees such as closing costs, insurance, and property taxes. Factor in all associated costs and budget accordingly to ensure you can afford the entire home in Cambodia.

Inadequate Down Payment

Even though an 80% down payment is requested by the bank institution,. Providing a small down payment may result in higher monthly payments and interest rates. If you have enough preparation time, try to save for a sufficient down payment to secure better loan terms and reduce the overall cost of the loan.

down payment - how much should you pay

Conclusion

Congratulations! You’ve understood the housing loan rate in and out of Cambodia. More than ten thousand applicants apply for home loans in Cambodia every day. Use the knowledge you have learned from Khmer Prosperity Loan to be the most outstanding one to shape your pathway to homeownership. From understanding the fundamental components of interest rates to navigating the complexities of loan types and eligibility criteria, Khmer Prosperity Loan is ready to get your inquiry online. Contact us to know more about home loan deeply, or sign up for a fast home loan package here!

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Frequently Asked Questions (FAQs)

Q1. Which bank offers the lowest interest rate on a housing loan?

There’s no lowest interest rate on a housing loan because each bank and loan provider will change their offer from time to time.

Q2. Which bank provides the highest home loan?

Currently, Acleda Bank has one of the highest home loan sizes, with up to $300,000.

Q3. What is the interest rate on housing?

The interest rate varies depending on the bank and other factors. The range of interest rates in Cambodia is from 7% to 18%.

Q4. How do you calculate interest rates?

You can get your interest rate from the loan provider to calculate your payment repayment and the total interest to be paid.

Author
Vannak Sen

Vannak Sen is Khmer Prosperity Loan's dedicated financial advisor. His expertise lies in guiding entrepreneurs through the loan process with ease. Vannak’s articles offer simple, actionable advice, helping your business navigate the financial landscape and thrive. For personalized, clear, and practical strategies that resonate with the Cambodian business community, rely on Vannak’s insights.

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