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HOME (MORTGAGE) LOAN FROM SHAHJALAL ISLAMI BANK LIMITED
Prepared for
Abdullah Al Yousuf Khan
Faculty of CBA
IUBAT University
Prepared by
Firefly
Submission Date: 4th August 2016
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Letter of Transmittal
August 04, 2016
Abdullah Al Yousuf Khan
Faculty of CBA
IUBAT University,
Sector-10,
Uttara Model Town, Dhaka-1230, Bangladesh
Dear Sir,
It gives us enormous pleasure to submit the report on “Home loan of Shahjalal Islami Bank
Limited” as per the Advisor’s instruction. We expect this report to be informative as well as
comprehensive.
This report is basically discussed about the following issue that is given bellow:
Fixed rate mortgage loan, ratio of mortgage loan.
The principal amount of mortgage loan, term of mortgage loan
Calculation of mortgage loan and
Other condition if someone to repay the loan
Your acceptance and appreciation would surely inspire us. For any further explanations about
the report, we will be gladly available to clarify the ins and outs.
Sincerely,
Firefly
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Table of Contents
Prefatory Part Page no.
Title page 1
Letter of Transmittal 2
Executive Summary 4
CHAPTER 01(Introduction) Page no.
Introduction 6
Background 6
Purpose 6
Significance 6
Scope of the report 6
Methodology 7
Organization of report 7
CHAPTER 02(Body Part) Page no.
About Home loan of Shahjalal Islami Bank 9
General Terms and Conditions 9
Monthly Installment 10
APR calculation 10-11
Process of repay 11
Findings 12
Summary 12
Conclusion 13
Appendix 14
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Executive Summary
At the beginning of the semester, we were assigned this major report writing assignment. Our
honorable faculty provided us a guideline for preparing this report. We followed this outline in
a very strict manner. The introductory part of the report includes objective, and scope of the
report, methodology &limitations. Then we proceeded on with the very primary concept of that
is including interest rate, monthly payment, and term of the installment and so on. Then we
have calculated the monthly payment and also calculated annual percentage rate (APR) .And the
lastof the reportwe have discussed the summary of the report, findings, conclusion andgivingthe
appendix. There are number of limitations for which we would not able to represent it as we
have sketched to do.
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Introduction
A dream of own home and to make the dream come true, this is a home loan project. Home
loan is for purchasing of old or new house/flat, construction of apartment or house,
Renovation/alteration/extension of existing house/flat and takeover of existing housing
Loan from other bank or financial institution. Home is an address, a shelter for entire life, and
this is what one leaves behind for the family. A house is the single biggest investment that you
will make in your lifetime. "DBBL Home Loan" is an attractive home & mortgage based loan
facility for all credit worthy individual of Bangladesh who wish to buy new or used
apartment/flat, mortgage their existing house/flat/apartment or construct/ renovate/ extend
their existing flat/house etc.
Background
Today home loan plays important role for establishing new house or purchasing new house or
construction new house. The commercial bank provides very low interest rate for giving loan to
the borrower. Almost bank provides 70% amount of total amount if the borrower purchase new
house and interest rate is 13-15 percent. Before making the report we have gone Shahjalal
islami bank limited in uttara branch and we have collected lot of information about the home
loan. That information’s really helping us to make this report.
Purpose
Primary purpose
The main purpose of this report is to know that mortgage loan system of Shahjalal Islami
Bank Limited.
Secondary Purpose
To know the principal amount borrowed.
The yearly interest rate of the loan.
The term of the loan.
How much installment per month.
Other charges if the bank may charge.
Significance
We will able to know from this report that the calculation process of fixed rate mortgage or
adjustable rate mortgage (ARM) and the ratio of mortgage loan. We will also know from this
report that the principal amount of loan, interest rate, per month installment and so on.
Scope of the report
The scope of this report is limited to the overall descriptions its product & services. This report
finding will be limited to the home line products offered by Shahjalal Islami Bank Limited.
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Methodology
For preparing this report, we have used both Primary and Secondary data.
Primary data
Most of the necessary information has been collected by from the personal
Observation and discussion with the relevant officials.
Secondary data
The selected department has been collected from secondary sources.
Web pages
Other published documents
Organization of report
In the report organization, we have divided into three part that are prefatory part, introduction
part and body part. In prefatory part that includes title page, letter of transmittal, and executive
summary then introduction part that are included purpose, significance, scope, methods and so
on and the body part that are included general terms and condition, monthly installment ,and
calculation and process of repayment. And the last of the report are given findings, summary,
and conclusion.
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About Home loan of Shahjalal Islami Bank
Housing has now become an acute problem in the country, especially in the towns, cities and
metropolis. With their limited income, it has become almost impossible on the part of the
lower middle class, middle class and sometimes, even for upper middle class to solve their
housing problem. To meet this basic human need, Shahjalal Islami Bank Limited is committed to
contribute to this end to provide a peaceful and happy living. The Bank has introduced 'Housing
Investment Scheme' with the objective to ease and minimize the housing problem and assist
service holders and professionals with limited income in materializing their dream of becoming
owner of houses.
General Terms and Conditions
The principal amount borrowed will be Maximum BDT 7000, 000/-
The yearly interest rate is @ 15 %
In case of purchase new apartment/house, bank will bear 70% of the total amount; rest
of the amount will be paid by subscriber.
In case of purchase old house/apartment bank will bear 50% of the total amount, rest of
the amount will be paid by the subscriber.
In case of constructing new house, bank will invest 60% of the total amount; rest of the
amount will be paid by the subscriber.
Tenure
1 to maximum20 years.
Eligibility
Serving defense officer.
Permanent faculty of college and university.
Degree owned doctor, engineer and established service holder.
Government, semi-government, privatized and reputed private organization,
multinational company, NGO and reputed private organization’s permanent employee.
Subscriber’s age will not exceed 65 years.
Minimum Monthly Income:
- Salaried: BDT 40,000
- Self Employed: BDT 50,000
Installment
Payable at an equal monthly installment.
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Monthly Installment
The installment per month barriers with the loan amount. That means how much amount
borrowed for loan from the bank and it is also depend the term of the loan. We can find out the
monthly installment by using the following formula which given bellow for fixed rate mortgage.
P= L[c (1 + c) n] / [(1+c) n - 1]
Where
P= monthly mortgage payment
L= total amount of mortgage
C= monthly interest rate
n= number of years
Hence, our loan amount is 2000000 taka, interest rate is @ 15% for 10 years. Then we can
easily find out the monthly payment by using above formula.
Replace the "c" in the above formula with the monthly interest rate--a value that can be
determined by dividing our annual percentage rate by 12. Prior to making the calculation,
convert the interest rate from a percentage to a decimal by dividing the interest rate by 100.15
annual percentage rate would convert to 0.15. Divided by 12, the monthly interest rate would
[[become 0.0125.
Substitute the number of months of the loan for "n." Therefore, loan term is 10 years; the value
of "n" would become 120--the product of 10 multiplied by 12.
Now we can easily find out monthly payment,
P= L[c (1 + c) n] / [(1+c) n - 1]
= 2000000[0.0125(1+0.0125)120]/[(1+0.0125)120-1]
= 2000000[0.05550]/4.385395
= 25311.28895 taka
APR Calculation
A standardized calculation allows you to compare the interest rates being offered by different
lenders. Without a standardized method, it's difficult to know for certain whether the lowest
quoted rate is, in fact, the lowest actual rate. This standard measure of the cost of borrowing is
known as the annual percentage rate (APR), and its formula for calculation is:
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i = 2 x n x I / P (N + 1)
In which
n is the number of payment in one year
I is the total financing charges (mostly interest)
P is the principal (the amount borrowed), and
N is the of schedule payments
Here,
n= 12
I= 300000(2000000*0.15)
P= 2000000 taka
N= 10
With that in mind, let's calculate the annual percentage rate using the formula above:
i =
2∗n∗I
P(N+1)
=
2∗12∗300000
2000000 (10+1)
=
7200000
22000000
= 32.72%
Quite a bit different from the quoted rate, wouldn't we say? So, don't take their word for it.
Always run the numbers our self, or have someone trust runs them for you. Having the right
information can save us a lot of money.
Process of repay
Loan repayment can be made in the form of monthly installments. You have the flexibility of
choosing a convenient repayment period between 5 and 25 years. Your monthly installment
will be automatically debited from your personal account with Shahjalal Islami Bank Limited.
Interest is calculated on a monthly reducing balance as opposed to an annual reducing balance,
giving you a lower monthly installment amount with Shahjalal Islami Bank Limited.
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Findings
Interest rate differs from one area to another area
To give grace period to pay the installment
No early adjustment fees
No charge for processing fee
No charge for renewal/enhancement fee
Summary
We have discussed about the home loan in this report. We have also discussed the monthly
installment basically monthly installment depend that how much amount borrow from the
bank. Bank had offered us @15% interest rate but it is different from annual percentage rate.
The bank will bear different rate of amount in case of purchasing of new house, old house and
construction new house.
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Conclusion
After the discussion we have find out the interest rate and the annual percentage rate are little
bit different. The interest rate should decrease for home loan .However; one of the basic
human needs is to have a house to live in. A house is an abode of peace and happiness. Shajalal
Islami Bank Limited is a promising bank in the current banking sector. It has a promise to fulfill
every possible customers needs and serve the society with high efficiency and satisfaction.
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Appendix
Website:
Website of Shahjalal Islami Bank Limited.
http://web.finweb.com/loans/calculating-interest-rates-and-apr.html#ixzz4Fc0eFQxk
BooksandDocuments:
BankManagement&FinancialServicebyPeters.Rose
