Opting for a Home Loan is one of the most significant financial decisions of your life. Given the hefty amount of money involved in this loan, most lenders are keen on evaluating your financial health as well as your willingness and capability to repay the loan, over the 10, 15 or 20 years (or even 30 years in some cases) of your loan tenure.
While they do not specifically turn down a Home Loan Application depending on whether you are single, divorced, widowed, however, you should understand that in some cases your less-than-ideal marital status may prove to be a barrier between you and the much desired Home Loan. Let us help you understand the nuances of the same.
A great way for lenders to determine your Home Loan eligibility is to calculate your total household income versus your expenses. If you are married, the income of your spouse is also factored in for this calculation. Given that this makes your overall income more significant, your chances of getting a Home Loan significantly improve.
Furthermore, this marital status also helps you enjoy a higher equated monthly instalment (EMI) and consequentially a higher amount of Home Loan. When you take credit, it is considered to be ideal that your EMI doesn’t exceed 40% of your income.
For instance, if you earn 1 Lakh per month and your spouse makes 1.2 Lakh a month, you will be eligible to get a loan such that your maximum EMI is 88,000. Hence, you can conveniently get a loan worth 75 Lakhs.
Let us now understand how you may or may not have access to this very loan, depending on your current marital status.
As a single person applying for a Home Loan, you will have only your income to show, and hence, your ideal EMI will fall drastically. Taking the above example, your income of 1 Lakh per month will only allow you to pay 40,000 towards the EMI. Hence, for the same interest rate and tenure, you will just be eligible to get a loan of 36 Lakhs only which is far less than 75 Lakhs.
When divorced, not only do you lose out on the advantage of having a higher household income but, you are also required to pay monthly alimony. This further brings down your disposable income. As might be evident, banks and lenders aren’t pleased with such a situation. Hence, if you make 1 Lakh a month, and end up paying 40,000 as alimony or child support, your net income will only be 60,000. This would mean that you are only eligible for a Home Loanin the range of 22 Lakhs to 25 Lakhs.
Of course, if you are on the receiving end of the alimony, it may strengthen your Home Loan eligibility. However, the lender will only factor in this alimony if you have already been receiving it for a minimum of six months. Moreover, you will need to furnish proof of the fact that you will continue to receive the alimony for a minimum of three years in the future.
Whether you are single or divorced, a great way to improve your chances of getting an approval on your Home Loan application is to have a co-signer on board. This will assure the bank that in case you struggle to pay your EMIs, the bank will have an alternative payer to fall back on. That said, the co-signer will not help increase your loan eligibility concerning the bulk of the loan. All it will do is to convince the lender, that it will be easier for them to recover the loan amount.
We understand that at this moment, you may probably be thinking that being married, preferably with a working spouse, is possibly the best way to get a high-value loan. However, that is not entirely true. One crucial factor that determines your Home Loan eligibility is your credit score.
Hence, merely having a higher household income may not be entirely helpful, if you or your spouse do not enjoy a respectable credit score of 650 and above. In fact, even if you have a high credit score, but your spouse doesn’t, it will adversely impact your loan application, and may also lead to an outright rejection.
We hope that you are now aware of the various aspects pertaining to Home Loan eligibility and how it gets affected by your marital status. You must hover, understand that no bank or lender can explicitly deny you a loan simply because of your marital status. If you enjoy a respectable income, complete with a high credit score, you can and will get the desired Home Loan amount without much struggle!
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