It's a bigger risk for the bank and so the process for obtaining a home loan is more complex and more expensive than that for other kinds of personal borrowing.

Down payments
Unlike some European countries, banks do not finance the entire purchase price of a home. The percentage they do put up varies from bank to bank. Some will finance up to 85 percent, others only 50 percent. In all cases, the loan is based on a professional valuation of the property, which may differ from the asking price. If the appraisal values an apartment at $130,000 and the purchase price is $150,000 (or even the other way round), the loan is based on a percentage of the lower figure. Even agreement on valuation may not solve all problems. If the developer requires 30 percent and the maximum bank loan is 60 percent, the difference must be found elsewhere before completion of the deal.

Affordable package
Repayments may be spread over 30 years and it is in the bank's interest as much as the home-buyer's to agree on a package the purchaser can afford. The amount borrowed is usually fixed so that repayments do not constitute more than one-third of the borrower's salary. Charges apart from the interest are not all applied by every bank, although what is saved in one area may be lost in another (see table).

Interest
Interest constitutes by far the largest slice of the cost of a home loan. Very few banks adopt a fixed interest rate for the whole period of the loan. In most cases, the rate fluctuates according to world rates (such as LIBOR - London InterBank Offered Rate - or US Prime), with a fixed percentage added. With both marker rates very low, the figures quoted in Lebanon are usually stated not only as a certain percentage above one or the other but also as a minimum. Rates are usually reviewed once a year. Some banks adopt a promotional rate for a specified period at the beginning when buyers' expenses are high.

File fees and commission
Some banks impose a fixed file fee in the range of $150-$250, while others charge 0.2 percent to one percent of the amount of the loan, with a minimum that varies between $100 and $1,000, depending on the size of the loan. Banks usually ask for file fees to be paid before the loan is granted. Banks charge commission varying from 0.1 percent to one percent, applied either on the loan or on the outstanding portion.

Fiscal stamps
Payments through fixed schedules incur no stamp fees. When repayment occurs through notes, 0.15 percent of the amount of each note is charged (i.e. the stamp cost on a $1,000 note is $1.50).

Appraisal expert
A property valuation expert puts a price on the home so the bank has an independent idea of what it is worth. Although this is yet another fee for home-buyers, it allows buyer and lender to know if the price is a fair one. These flat fees fall in the $100 to $200 range. This charge is paid before the loan is finalized.

Compulsory insurance
Both life and house insurance are required. Coverage is either the value of the house or exceeds the loan by a factor determined by bank policy, sometimes up to 130 percent. All banks insist on cover against fire and some require insurance against natural disasters and a few against war. Third Party Liability, covering visitors who are injured in incidents connected with the home, for example, is also demanded by some lenders. All banks demand coverage against death or total permanent disability. Borrowers pay all premiums. Even when the level of house insurance is based on the amount of the loan, the cover does not decrease as the loan is paid off. The possibility of total destruction of a property necessitates full cover all the time.

Mortgage fees
Mortgage fees are government charges for registering the loan, giving the bank legal rights to prevent sale of the house until the mortgage is paid. Loans of less than $120,000 with a repayment period of more than seven years are exempt from mortgage fees. Otherwise, the fees are calculated at two percent of the mortgaged amount, including fiscal stamps. The total for a $150,000 loan mortgaged at 120 percent would be $3,600.

House requirements Banks want to see a copy of the purchase contract to confirm that a sale exists. They do not hand over loan proceeds to the borrower, but pay it to the seller on legal completion of the deal. Banks also hold the property deeds until the loan is repaid. Regarding loans for renovation, the money is made available to the borrower in a separate account, but banks generally require proof that the money is being spent for its proper purpose.

Late and early penalties
Late payment penalties range between one percent and five percent per month on the installment calculated daily, sometimes with a minimum penalty. Equally, paying lump sums off the loan may not save much money. Repaying 'a few' notes may save nothing at all. What constitutes a 'few' notes is a matter for negotiation between borrower and lender. Even if the whole balance is repaid early, banks deduct from the settlement figure money equivalent to only one percent to five percent interest.

What do I need to apply?
On a personal level, the borrower needs a steady job and a salary that justifies the level of the loan. Applicants need to provide a copy of their ID, a detailed salary statement, length of employment, type of work, net salary, and a declaration of all financial commitments. Salary and job details need to be confirmed by the employer on company stationary. Some banks will include a proportion of the spouse's earnings to determine whether the household income is high enough to justify a loan. The lenders will almost certainly seek salary domiciliation of salary. Some lenders may seek a guarantor.