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How home financing works in Pakistan

Banks in Pakistan offer home financing in two broad forms: conventional interest-based mortgages, and Islamic home financing (commonly structured as Diminishing Musharakah, where the bank and buyer jointly own the property and the buyer gradually purchases the bank's share while paying rent on the remaining portion). Both typically result in a similar-looking fixed monthly payment, though the underlying structure differs.

Tenure has a bigger impact on home loans than most people expect. Stretching a loan from 15 to 25 years lowers your monthly installment noticeably, but can roughly double the total interest paid over the life of the loan — it's worth calculating both ends before committing to a longer tenure just for a smaller monthly number.

• Most banks require 10-30% down payment depending on the property type and financing scheme.
• Compare markup rates across a few banks — a 1-2% difference is significant over a 15-25 year tenure.
• Factor in property transfer fees, stamp duty, and legal charges separately — these aren't included in the loan amount.
• Ask whether the rate is fixed for the full tenure or variable/reviewed periodically — this materially affects your long-term payments.