Home Loan in Pakistan: How Mortgages Work, KIBOR Pricing and Current Rules (2026)

A home loan in Pakistan is usually priced at 1-year or 6-month KIBOR plus a 2–4% bank spread, can run up to 30 years under SBP's 2026 rules, can cover up to 90% of the property value, and your total monthly instalments cannot exceed 65% of net disposable income.

A home loan in Pakistan is almost always a floating-rate loan priced at KIBOR plus a bank spread, typically 3% for salaried borrowers and 3.5–4% for business owners. The State Bank's 2026 rules allow a tenure of up to 30 years and financing of up to 90% of the property's value. The 1-year KIBOR offer rate stood at 12.09% on 10 August 2026, so a salaried borrower's starting rate at that point was roughly 15%.

That is the short version. The rest of this guide explains how the pricing moves, what the State Bank of Pakistan (SBP) now allows, how much a loan costs in rupees, and which government schemes are open right now.

How a home loan in Pakistan works

A conventional bank lends you money against a mortgage on the house. You repay in monthly instalments of principal plus markup over the agreed tenure. If you stop paying, the bank can enforce its security over the property.

An Islamic bank does not lend. It co-owns the house with you under Diminishing Musharakah, rents its share to you, and sells that share back to you in units. The monthly payment feels similar, but the contract is different.

Both kinds of financing can be used for more than buying a finished house. The SBP Prudential Regulations for Housing Finance 2026 cover:

• buying a house, apartment or plot
• building a house on a plot you already own
• renovating or extending an existing house
• installing solar or other renewable energy at home

Each bank decides which of these it actually offers. Bank Alfalah, for example, says on its home finance page that it does not finance a plot on its own; it will finance "plot and build" together.

Key terms you will see in a bank offer

KIBOR-linked pricing: what you actually pay

Most banks quote 1-year KIBOR plus a spread, reset once a year on the loan anniversary. Some, like MCB, use 6-month KIBOR. On its home loan page, MCB also lowers the spread as your equity rises: KIBOR + 3% for salaried borrowers putting in under 30%, falling to KIBOR + 2% at 50% equity or more.

The latest SBP KIBOR sheet we could open is dated 10 August 2026. It showed these offer rates (SBP KIBOR quotes, 10 Aug 2026):

KIBOR follows the SBP policy rate. The Monetary Policy Committee held the policy rate at 11.5% on 27 July 2026 and again on 14 September 2026. KIBOR changes daily, so check the current figure on the SBP website before you sign.

Why floating rates matter

Your spread is fixed for the life of the loan. KIBOR is not. If 1-year KIBOR rises by one percentage point at your repricing date, your instalment rises with it. Some banks offer fixed or hybrid periods; Standard Chartered's Saadiq Home Finance offers rates fixed for the first three or five years before they float.

Worked example: what a Rs10 million loan costs

These figures use the 10 August 2026 1-year KIBOR offer rate (12.09%) plus a 3% spread, giving 15.09%. They assume the rate never changes, which it will. Treat them as an illustration, not a quote.

Two lessons stand out. Stretching from 20 to 25 years cuts the instalment by only about Rs3,500 a month but adds about Rs6.9 million in total payments. And a business owner paying KIBOR + 4% pays roughly Rs7,500 more a month than a salaried borrower on the same loan.

Tenure, LTV and DBR: the SBP limits

The SBP revised its housing finance rules on 18 August 2026. ProPakistani reported that the changes took effect immediately and replaced several circulars from 2019–2021.

These are ceilings, not promises. Banks set tighter limits in their own policies. Bank AL Habib's house finance page still lists a 25-year maximum, a 50% DBR and 75–85% financing for home buyers. Bank Alfalah caps Home Buyer financing at 80% of value.

What 65% DBR means in rupees

On the Rs10 million, 20-year example above, the instalment is about Rs132,300. At a 65% DBR you would need net disposable income of roughly Rs204,000 a month if you had no other loans. If your bank applies a 50% DBR, that rises to about Rs265,000.

Government schemes currently live

Wazir-e-Azam Apna Ghar Program (Mera Ghar – Mera Ashiana)

This is the federal markup subsidy and risk-sharing scheme run through SBP. Prime Minister Shehbaz Sharif relaunched it on 30 April 2026 with Rs321 billion in first-year financing.

The March 2026 revision cut the borrower rate to 5% and adjusted loans already disbursed at 8%. Profit later reported the house size limit as 250 square yards, so confirm the current size cap with your bank.

At 5% over 20 years, a Rs10 million loan works out to about Rs66,000 a month for the first ten years. That is half the commercial instalment.

By June 2026, about 107,000 people had applied, 27,000 had been approved and 13,000 rejected, according to SBP officials. Weak credit histories and past defaults were the main reasons for rejection.

Punjab: Apni Chhat Apna Ghar

The Punjab government's programme offers interest-free housing loans to low-income families. By 30 June 2026 it had disbursed 166,000 loans and more than Rs215 billion. Loan size and repayment terms were not stated in that report; check the official portal.

A related Punjab scheme, Apni Chhat Mehfooz Chhat, gives interest-free loans of Rs500,000 for repairs and Rs1 million for adding a floor, repayable over nine years. Applications go through acag.punjab.gov.pk or DC/AC offices.

How to apply: step by step

1. Check your credit report. Banks must pull a current report from SBP's eCIB or a licensed credit bureau.
2. Calculate your DBR, including car loans, credit cards and personal loans.
3. Shortlist two or three banks and compare spread, repricing basis and early-settlement charges.
4. Get the seller's title documents and have them pre-verified.
5. Submit the application with income documents. Salary slips and bank statements should be no older than 60 days under the SBP annexure.
6. The bank values the property and checks title.
7. Sign the offer letter and mortgage documents; pay your equity share.
8. The bank pays the seller and registers its mortgage or lien.

Common mistakes

• Looking only at the first-year rate. The spread is what stays fixed. Compare spreads, not teaser rates.
• Ignoring repricing risk. Budget for a rate two points higher than today.
• Forgetting the costs on top. Advance tax, stamp duty, registration and insurance are payable by you, not the bank.
• Applying with an unresolved eCIB entry. A single overdue credit card can sink an application.
• Choosing the longest tenure by default. As the table shows, extra years cost millions.

This guide is general information; confirm current rates with FBR/the bank/a lawyer before you pay.

Sources