- Buying a dream home requires huge capital outlay, which is often beyond the capacity of the medium and low-income citizens. On the other hand, banks don’t finance 100% of the cost of the house instead a customer is required to contribute a certain portion of the cost in the form of equity contribution. Most people can’t even afford to Pay the equity contribution in single payment, they need to save over series of times. Thus, mortgage saver account provides an opportunity to save at a better interest rate and to get mortgage loan at a competitive rate.
Purpose of the Mortgage loan
- The Scheme provides customers access to a separate high yielding savings account that is specifically earmarked to pay for a planned future home down-payment easily
- A Customer who intends to save and take mortgage loan in the future can open a separate savings account for reasons such as;
- a competitive interest rates on saving and loans opportunity to access mortgage loans after accountholder successfully meets the requirements, such as minimum savings balance.
- Saving in a separate account reduces the temptation to dip into savings for his day-to-day expenses
Features of Mortgage Saver Account
- MSA is a planned savings account designed to help customers build up a deposit to buy, build, or renovate their house in the future.
- The account maturity balance will be used as down payment/equity contribution for the purchase of the home.
- The account earns interest at a higher rate than normal savings account.
Accountholders can deposit and withdraw money against MSA without restrictions
The Bank will provide mortgage loans at maturity if all the requirements are well met.
Opening and Operation of Mortgage Saver Account
- The minimum initial account opening balance is Birr 500
- The periodic deposits amount can be chosen and planned freely by the customer.
- Customer shall set an estimated realistic time frame over which he can save to reach at his plan, at a given amount to put away each month.
- Staff of the Bank shall assist to work out how long it will take to reach a planned savings balance
- The MSA can be opened either as sole or joint (husband and wife only)
- An individual cannot open and operate more than one Mortgage Saver Account.
- A customer can set up a monthly standing instruction to transfer funds to MSA .
- Withdrawals can be made as the customer wishes without limit.
- Deposits to MSA can be made at any branch of the Bank and using available channels.
- The Bank’s IT unit shall create a Mortgage Saver Calculator to assist Mortgage Saver customers in calculating;
- The final planned deposit balance at maturity
The required monthly savings installment amount
Staff of the Bank may assist In determining a monthly installment using the Mortgage Saver Calculator.
- The calculator shall be available online so that customers can use it with no need to visit branches.
Minimum Deposit Tenure and Balance at Maturity
- For the Accountholder to be eligible for property loan (home loans),
- The minimum depositing period is at least a year
The final/maturity deposit amount shall not be less than ETB 100,000.00 and shall cover at least 30% of the house to be purchased.
- The deposit installment amount over the deposit tenure shall be fairly distributed with a tolerance level of + or – 10% in each month deposit.
- The client may bring additional deposit at maturity if the deposited amount does not meet the 30% requirement, but the amount at maturity shall not be less than 25% of the requested loan.
- In this case, the client need to wait at least a month to request the loan after depositing the amount that brings the total deposit to the required 30% of the value of the property
- The customer can deposit any amount during a month
- The loan will be provided based on the account balance during the tenure of the deposits.
- At least 40% (40%*30% = 12% of the cost of the property) of the required down payment shall have to be deposited during the first half of the tenure.
The remaining 60% of the equity contribution shall be the 2nd half of the deposit tenure.
- At the end of the tenure, the Bank provides loan for the remaining 70% of the value.