Purchasing a house of your own is nothing less than a dream come true. Of course, it isn’t essential for you to have the entire amount needed for this significant purchase at your disposal. It is for this reason that Home Loans are readily available. You can conveniently opt for any of the top home financing products such as PNB Housing Loan or ICICI Home Loan and make this important purchase with ease.
|Lender||Interest rate (Min)||Interest rate (Max)|
|PNB Housing|| |
|Bank of Baroda|| |
|Bank of India|| |
|Union Bank of India|| |
|Axis Bank|| |
|Bajaj Finserv|| |
|Kotak Mahindra Bank|| |
However, before you set out on the search for a Housing Loan, it is crucial that you must be aware of the factors which determine your eligibility for the same. These factors are – your age, your monthly income, your credit score along with your ability to make the down payment.
Let us understand the importance of each of these factors in greater detail below:
In order to receive a Home Loan of the desired amount, it is imperative that your EMI outgo is equal to or preferably less than 50% of your monthly income. This is to ensure that even after you pay your EMI, you have sufficient funds to ensure that you can comfortably manage your day-to-day living expenses, as well as any unforeseen expenses that may come up along the way. Hence, if your monthly salary is Rs. 1 Lakh, your Home Loan EMI should not be greater than Rs. 50,000.
Since a Home Loan is a long-term commitment and involves a substantial amount of money, your bankers will need you to have an exceptionally high credit score of 750 or above. Not only will such a good score have a positive impact on your Home Loan Eligibility, but will also ensure that your lender willingly offers you the credit on favourable terms.
As a way to know and understand your ability to repay the Home Loan, most lenders make it mandatory for you to contribute at least 10-15% of the market value of the residential property towards the payment. Hence, if you are looking forward to investing in a property costing Rs. 50 Lakhs, your lender will expect you to shell out anywhere between Rs. 5 Lakhs and Rs. 7.5 Lakhs as the down payment. You can then go ahead to take a Home Loan for the remaining amount of Rs. 42.5 Lakhs to Rs. 45 Lakhs.
Yet another aspect that plays a pivotal role in determining your eligibility for a Home Loan is your age. Most lenders prefer to offer Home Loans to borrowers who are between 21 and 60 years of age. Moreover, if you are opting for a longer tenure of 20 or 30 years, your eligibility will be higher if your age is 70 or less, at the time of maturity of such a long loan.
If your monthly income is Rs. 55,000 net, your Home Loan EMI can be a maximum of Rs. 22,500, as per the 50% rule. Assuming, you take the Home Loan for a period of 20 years, as is the usual benchmark, at the rate of 10% per annum, a loan amount of Rs. 40,00,000 will result in an EMI of Rs. 38,601. As you can see, this is Rs. 16,000 more than your ideal EMI. Besides, it breaks the 50% rule and leaves an incredibly minimal amount of Rs. 16,400 for your day-to-day expenses. In spite of the exceedingly high EMI, you will end up paying interest of Rs. 52.64 Lakhs over the 20 years, thus amounting to a total spend of Rs. 92.64 Lakhs.
Since the above calculations will make it truly impossible for you to lead a quality life, while still owning a home, it is imperative that you take some requisite measures to bring down your EMI.
To this end, you will first need to find a Home Loan which is being offered at a lower interest rate, say between 6.75% to 8.30%.
Yet another step that you may take, is to opt for an extended loan tenure of 30 years. Other aspects remaining constant, your EMI at 10% interest rate in this case will decrease to Rs. 35,103. Furthermore, if you opt for a lower interest rate of 8.75%, as discussed earlier, the EMI will further fall down to Rs. 31,468. While this is still higher than the recommended EMI, you will at least have a modest sum of a little over Rs. 23,500 to manage your living expenses.
While this loan will be comparatively more manageable for you to procure and to pay off, you must understand that in this case, your interest amount will sum up to Rs. 73,28,485, over the course of the tenure. Besides, the total amount payable will go up to a whopping Rs. 1,13,28,485, making the loan extremely expensive for you.
Further, you must consider co-applying with your spouse so as to increase the loan eligibility and lay off the burden of EMI from your shoulder.
In case, you are confident of periodic increases in your income, in line with the progression of your career, you can also opt for Step-Up Repayment Plan, wherein your Home Loan EMI will increase as the time progresses. In this case, the EMI will remain constant for the first few years of your loan tenure, after which it will increase steadily. Not only will this facility help you in repaying the loan with greater efficiency, but it will also accentuate the probability of the approval of your Home Loan application.
Herein it is imperative to avail professional financial advice and compare all the available avenues before signing the loan document.
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