What is mortgage finance?
Mortgage finance is a means that helps clients acquire real estate units, whether for residential, commercial, or finishing purposes. Applicants benefit from the longest possible repayment period based on the applicant's age.
What are the advantages of mortgage finance?
The mortgage finance term is determined according to the periods applied by the financing party in light of the Executive Regulations of Law No. 148 of 2001.
- The primary security in mortgage finance is the property being financed.
- In mortgage finance, it is possible to combine more than one income and more than one partner.
- Mortgage finance is compliant with Islamic Sharia provisions, as it is carried out through a tripartite contract.
What is the maximum mortgage finance amount?
90% of the property value as determined by the appraisal expert or the basic sale price agreed upon by the parties, whichever is lower.
Are there other solutions to increase the finance amount?
Yes, there are solutions by providing any additional income of the client that can be documented, or by joining with a partner with additional income.
Can the client make early repayment of the remaining balance during the finance period?
Yes, the client can pay the remaining balance as an accelerated repayment along with the applicable administrative fees.
Can unregistered units be financed if the land is registered and has a building permit?
Yes, this type of unit can be financed provided there are no violations on the property.
What is the legislative framework for mortgage finance activity in Egypt?
The Mortgage Finance Law No. 148 of 2001, as amended by Law No. 55 of 2014, its Executive Regulations, the decisions issued by the Financial Regulatory Authority (FRA) in implementation thereof, and Law No. 10 of 2009 together constitute the legislative framework for mortgage finance activity in Egypt.
Which authority is responsible for the regulation and supervision of mortgage finance in Egypt?
The Financial Regulatory Authority (FRA) is the official regulatory and supervisory body that oversees the mortgage finance market in Egypt.
What can be financed through mortgage finance?
The purchase, construction, renovation, or improvement of units (residential, administrative, service, commercial) can be financed through mortgage finance. Additionally, financing can be provided through the following innovative financial products:
- Finance through the finance lease ending with ownership (Ijara Muntahia Bittamleek).
- Finance through Murabaha.
- Finance through Musharaka (partnership).
- Finance of usufruct rights.
Can the financing institution help me choose a property?
Yes, financing institutions can guide buyers to available units from the real estate development companies they work with. The financing institution can also provide a list of registered real estate brokers with the Financial Regulatory Authority (FRA) to help find a suitable unit.
Does the property to be purchased need to be registered?
The principle in mortgage finance is that the financed property must be registered in the seller's name. Following amendments to the Mortgage Finance Law, the legislature permitted the financier to accept other collateral if the property is unregistered, such as other real estate assets, personal guarantees from non-investors, securities listed on the stock exchange, or deduction of installment values from the investor's salary.
In cases where the financed property is for construction, renovation, or improvement on land allocated to the investor by the state or a public legal entity, the financier may accept a mortgage on the buildings as security for the granted finance.
Who is eligible for mortgage finance loans?
Any person who is at least 21 years old and is able to document their income and provide evidence of sufficient income is considered eligible to apply for mortgage finance.
How much finance can I obtain?
There are specific limits on the finance amount based on the property value and the approved finance ratio. The monthly installment must not exceed the following percentages:
- 35% of your monthly income if you are a low-income earner.
- 40% of your monthly income for social housing projects.
- 40% of your monthly income if you are not a low-income earner.
What is the repayment period for mortgage finance?
There is no fixed repayment period; mortgage finance can be repaid over the long term for up to 20 years or more according to repayment schedules. Mortgage finance loans for low-income families may be repaid over a period of up to 30 years pursuant to the contract with the financing institution.
Can I get mortgage finance that covers the full cost of the property?
No. The investor must contribute a portion of the property's value. The maximum finance limits are:
- 90% of the property value if the purpose is residential.
- 80% of the property value if the purpose is non-residential.
Are there fees associated with mortgage finance?
Yes, there are additional costs including: administrative fees, application study fees, real estate appraisal expert fees, and insurance and guarantee premiums. These vary from one financing institution to another; some are paid once upfront and others are paid in installments.
Can the buyer write cheques if unable to provide evidence of income?
The investor must provide income documentation to assess their financial solvency and creditworthiness. Cheques are used as a means of collecting installments, not as collateral or income proof. Promissory notes or bills of exchange may be written as guarantees, but they are not considered a source for increasing finance or proving income.
Can I provide other proof of income?
Yes, this may include: deposits, investment certificates, rental receipts for owned properties, agricultural land ownership contracts, tax returns, or a certificate from a certified accountant or official extract from social insurance records. The financier may accept other documents they are satisfied with to prove the investor's income.
Can the incomes of spouses be combined?
Yes, your income and your spouse's income can be combined in a single income statement. In this case, the total combined income is treated at the following ratios: 35% for low-income earners and 40% for non-low-income earners.
What type of lien is placed on the property?
The property is subject to a first-degree mortgage in favor of the financing institution as security for the finance transaction. This can be invoked to fulfill the financier's rights in the event the investor defaults on installment payments.
Can a mortgaged property be disposed of during the finance period?
Yes, with the financier's approval, the investor may dispose of the collateral property through sale, gift, lease, or any other disposition, but only after obtaining the financier's consent.
What information should be included in the income statement?
If you work in the private sector, government, or an authority, the income statement should include: a detailed salary breakdown (net and gross), job title, employment start date, employer's stamp, and the responsible manager's signature. Professionals can submit a certificate from the Tax Authority or from a certified accountant indicating taxable income over the past three years.
How can I obtain a real estate transaction certificate?
You can obtain the certificate simply by submitting copies of the property registered at the competent Real Estate Registry office; the certificate is issued in approximately two weeks. In new urban communities there are no real estate transaction certificates, but a certificate can be obtained from the New Urban Communities Authority stating there is no objection to financing the building, after excluding the land.
Can pension holders obtain mortgage finance loans?
Mortgage finance loans can be provided to early pension holders, provided the total finance amount is repaid before reaching the maximum age set by the financing institution, which is usually 60 or 65 years.
How can I benefit from the Mortgage Finance Guarantee and Support Fund?
The fund is designated for low-income individuals wishing to purchase residential units by reducing the finance amount to what the investor can repay. The maximum monthly income for subsidy eligibility is EGP 3,500/month for a single person and EGP 4,750/month for a family.
What is the tripartite contract?
The tripartite contract refers to the agreement model under which mortgage finance is granted to the investor. It is called tripartite because there are three financing parties. In the purchase product: the financier, the investor, and the seller. In the construction or renovation product: the financier, the investor, and the contractor.
Following the law amendment, bilateral models now exist such as: finance through finance lease ending with ownership (Ijara), Murabaha, and Musharaka (partnership).
Should I deal directly with the financing institution or through mortgage finance brokers?
Negotiations can take place directly with the financing institution or through a broker registered with the Financial Regulatory Authority (FRA). The financing institution bears all brokerage costs.
What is the role of a mortgage finance broker? How can we identify one?
A real estate broker is any natural or legal person who performs brokerage functions between the financier and the investor by providing technical advice, informing them of finance risks, and preparing the file for submission to the financier for a fee borne by the financier.
Their role includes: helping you choose the appropriate repayment system and calculating monthly installments and repayment period, completing required documents, and contacting the financing institution.
You can obtain a list of certified brokers by contacting the Financial Regulatory Authority (FRA) or the financing institutions.
Who is a real estate appraisal expert?
A real estate appraisal expert is any natural or legal person who performs the task of appraising and determining the value of a property for all financing purposes.
Is property registration after obtaining finance mandatory?
Registration aims to protect your rights and obtain official proof of property ownership to avoid any future disputes. Registration is an essential step for recording the collateral on the financed property (through a first-degree formal mortgage or a lien registration). This registration remains in effect until all finance installments are fully repaid.
What happens if the client fails to repay mortgage finance installments?
If the client is unable to repay, the financing institution should be notified immediately, as failure to pay 3 installments can lead the financing institution to initiate enforcement procedures on the property, in accordance with the provisions of Mortgage Finance Law No. 148 of 2001, as amended by Law No. 55 of 2014, and its amended Executive Regulations.
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