HOME LOAN
A Home Loan is a secured loan product where the lender provides finances for the purchase or construction of a residential/commercial property. One can also avail a housing loan to buy a plot of land and construct on it. Home Loans are also issued to extend/ repair/ renovate/ alter a new or second-hand property. The Home Loan is taken by a borrower against the property/security to be bought. This is done by giving the banker a conditional ownership over the property i.e. if the borrower fails to pay back the loan, the banker can retrieve the lent money by selling the property.
Most lenders get the property valued independently and provide loans based on their estimated value. It is important to remember, however, that frequently their valuation is significantly lower than the actual cost and hence the requirement of the borrowers goes up. Home loans in Indian Banks are provided up to maximum of 80% (90% for loan amount below INR 20 lakhs) of the value of the house. Home loans are repaid using Equated Monthly Installments (EMIs) spread over a fixed tenure.
Home Loan Eligibility Criteria:
Home Loan eligibility depends upon various factors. A few of them are listed here
Income
Your income determines the amount of home loan you are eligible for. Banks generally keep the EMI to income ratio at 0.45 to 0.50.
Tenture
The longer tenure you opt for, the more is your home loan eligibility and the lesser is your EMI.
Age
Your age will determine your home loan tenure and hence your eligibility.
Interest Rate offered
Banks offer Fixed and Floating Rates of Interest. If your interest rates are on a lower side, then the loan eligibility will be higher.
CIBIL Score
Your credit report tells the bank about your repayment capacity and hence determines if you’re eligible for a loan.
How should you choose your home loan while applying?
Buying a home is dream for many and one should be cautious while looking out for a home loan lenders. The foremost thing to be kept in mind is that one should never finalize a lender purely on the basis of interest rates. Most of us believe the cheapest is the best. But actually, in addition to this, there are other things that should be kept in mind while finalizing home loans.
Consider Home Loan Eligibility Factors
Banks have their own standards for calculating eligibility. Factors like age, annual income and loan tenures play an important role. You should do some shopping to check which bank is offering you a higher loan eligibility. Adding up your spouse’s income may be a good option to increase your eligibility.
Home Loan Fixed or Floating Interest Rate
A fixed interest rate means that you will have to pay same EMI over a period of time (it may be fixed for an entire tenure or it may be reset at fixed intervals). Floating interest rates may change at any given point of time, which may result increase or decrease in either your home loan EMI or your tenure. Consider your finances and repayment abilities before deciding on which interest rate to pick.