How can I enhance my home loan eligibility?
Rajat Dixit is a 30-year-old sales executive living in Delhi. His monthly income is Rs 50,000 and he presently pays monthly installments of Rs 8,000 per month. He approached a bank for a home loan and was told that he was eligible for a loan of about Rs 14,00,000 lakh keeping in view his monthly income and present EMIs on other loans.
This revelation disheartened Rajat as property rates are touching the sky and with Rs 14,00,000 at his disposal, a decent house will be a far cry.
To make his dream of owning a house come true, Rajat needs to take a few steps to increase his loan eligibility.
Banks look for a proof to make sure that a borrower has the capacity to repay the loan amount.
Most of the banks ascertain home loan eligibility on the basis of fixed obligations to income ratio, also known as FOIR. Banks fix FOIR to a maximum of 50 per cent of a borrower’s monthly income. This means that your fixed expenses (including EMIs on proposed home loan) should not be more than half your income.
If you need high amount as home loan, you need to increase your loan eligibility. Here are few options that can help in enhancing loan eligibility.
Longer loan term
Choosing longer loan tenure is one of the oldest ways to increase home loan eligibility. As the tenure of loan repayment goes up, the EMI naturally comes down elevating a borrower’s loan eligibility. Banks offer a maximum loan tenure of 30 years.
Prepay outstanding debts
If you have availed other loans such as personal loan or an auto loan, it affects your home loan eligibility. If you have excess cash in hand, you can prepay your other loans to improve your loan eligibility.
Club incomes
Another way to improve your loan eligibility is to club your income with your spouse, son or father.
Suppose your home loan eligibility is Rs 15,00,000 and your spouse earns a similar amount that you make, you can club your income with that of your spouse. With this, you will be eligible for a home loan of Rs 30,00,000.
Step-up loan
This is another way to enhance home loan eligibility. In a step-up loan, a borrower has to pay lower EMI in the initial years and in the second half of the loan repayment term, the EMI goes up. In step-up loan, future salary hikes of the borrower are taken into consideration.
Perks
If you belong to the salaried class, you must make sure that variable income,such as performance bonus, is also taken into account.
Cibil score
If you have an attractive Cibil score, you will definitely get the advantage and preference by banks.
Look for special schemes
If you are working for a reputed firm or an MNC, check out if some bank is running any special scheme with your employer. Banks generally categorize companies on the basis of their profiles and offer special interest rates or waiver of processing fee to their employees. A lower interest rates will enhance your loan eligibility.
