6-Step Strategy for Single Women Home Loan Borrowers
Buying a home while being single is a different proposition in comparison to buying one as a couple. A couple can work as a team, plan, identify, and finance the property together. The banks consider their joint income (if both are working) thereby increasing their Home Loan Eligibility. They get the chance to share the responsibility of paying the EMI (Equated Monthly Instalment).
These advantages do not accrue to single women when they opt for Home Loans. Single women face different challenges. Let us look at the strategy they can formulate to meet these challenges.
1. How Much Can You Afford?
It makes no difference whether you are a single woman or a single man. This challenge is the same for both. The first step is in deciding the affordability. You have to consider two factors:
a) How much margin money you have to bring?
b) How much EMI can you afford without disturbing your usual monthly expenses?
Setting a realistic goal is essential. Banks sanction up to 80% of the cost of the house. In case the loan is below 25 Lakhs, banks go one step further and sanction even up to 90%. Remember, the banks do not finance the stamp duty and registration charges today. Hence, you should be ready to bear the additional expenses. You have to arrange for the following:
a) Margin money to the maximum extent of 20%
b) Processing fees amounting to around 1% to 2% of the loan amount
c) Stamp duty depending on the state you reside (Women get a benefit of 1% to 2% if you register the property in their name)
d) Registration charges to the extent of 1%
e) Stamp duty on Equitable mortgage and registration charges (depending on the state you reside)
2. Save for Payment of Down Payment
Start your savings early. In fact, it is a fantastic idea to save a substantial portion of your income in a separate fund such as a SIP. The below-mentioned example can explain things better.
Saving 20,000 on a monthly basis for 5 years in a SIP offering a return of 10% will help you build a corpus of around 15.61 Lakhs. Saving a similar sum in a recurring deposit in a bank @ 7.5% will yield 14.60 Lakhs. You can use this sum as your margin money. If you are single and working, it should not be difficult to save 20,000 per month from your monthly income. This corpus can come handy in paying for the margin as well as the other expenses listed above.
3. Build Up Your Credit Score
Banks give a lot of importance to the credit score. It is very easy to build up a good credit score. Remember, you start on a clean slate in the initial stages. Getting a Credit Card in your name without a credit history is difficult. The best option is to go for the secured Credit Cards. Banks have products where they offer Credit Cards to their customers against their fixed deposit receipts.
Take a secured Credit Card for a small limit, say 60,000 against your fixed deposit receipt of 75,000. Use this Credit Card to make your monthly payments and purchases. Repay the Credit Card bills on time without any default. Maintain the same routine for a year or two. You will develop a good credit history.
Specific NBFCs (Non-Banking Financial Companies) give EMI cards based on your income and repaying capacity. Use these EMI cards to buy your electronics items and furniture. Regular repayment of the EMIs can improve your credit score within no time. These same NBFCs offer Personal Loans to you based on your credit history in repaying the EMIs. Avail these loans and be prompt in your repayment. You will build up and maintain a good credit score.
4. Take Advantage of the Government Benefits
The Government of India has announced various benefits to women homeowners and women Home Loan borrowers.
a) Concession in stamp duty by 1% to 2% (depending on the state you reside) to women provided you register the property in your name
b) Women can save up to 2,00,000 under Sec 24 and up to 1,50,000 under sec 80C of the Income Tax Act 1961 in the repayment of interest and the principal amount of the Home Loan respectively. In case, you are going for a second home in your name; there is no upper ceiling at all on the deduction you claim.
5. Explore Women-friendly Home Loans
Specific banks have Home Loan products exclusively for women. They have relaxation in eligibility criteria and offer concessional New Home Loan Interest rates for women. The rates are less by about 0.15% in comparison to the regular interest rates. The difference might appear negligible, but you save a lot during the entire tenure of the loan. The saving can be more than 1.25 Lakhs over a 30-year period.
The Government has announced the Credit-Linked Subsidy Scheme (CLSS) that allow interest subsidy from 2.35 Lakhs to 2.67 Lakhs depending on the economic category you belong. Such programs give preference to women beneficiaries, especially single working women and widows.
6. Be Prepared for Emergencies
This aspect is common to both men as well as women. One should always have a contingency plan ready in case something goes wrong. You might lose your job and with that your regular source of income. Have a contingency fund that can handle your EMI for a period of at least six to eight months under such circumstances. You can also explore loan insurance products to take care of emergencies. Keep these points in mind before you plan to buy a home and approach a lender for a Home Loan.
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