One can get up to 90% of the cost of a property as loan, the amount of loan will depend on the income of an individual who is taking the loan, but this will also depend on the amount one is taking as loan, this means bigger the amount larger the margin or your contribution to the purchase.
What are the Factors that Determine the Amount of Loan?
The total amount of the loan is determined by the bank by considering factors like:
- Location of the property (people living in urban areas get more money than the rural).
- Value of the property.
- Net income of the applicant.
- Credit score of the applicant.
What is a Fixed Rate of Interest on Home Loans?
It is the rate of interest that does not change during the tenure of the loan and the EMI will also remain fixed.
What is the Floating Rate of Interest on Home Loans?
If the interest rate is linked to an external benchmark rate it is known as floating interest rate. Banks in India consider the repo rate declared by the RBI. This benchmark rate changes from time to time. So, the rate of interest of the housing loan changes in accordance with the repo rate. As a result, the EMI or the tenure of the loan increases or decreases depending on the repo rate. Any increase in the repo rate will increase the interest charged by the bank on any kind of loan and decrease will make the loans cheaper for the customers.
How Much Tax Rebate Can One Get By Taking A Home Loan?
Under the existing income tax regime, there are provisions for housing loan customers to avail a bevy of tax benefits. The first among them is the room to deduct interest paid on housing loans by customers. Here’s a detailed explainer on the tax benefits on home loans.
What Is The GST On Home Loans?
GST refers to the goods and services tax. GST on home loans is 18% and it is charged on each payment that one makes to the company like paying EMIs, processing fees, among others.
Tips to Boost Your Home Loan Eligibility
Purchasing a property is a long-term financial commitment. While the affordability on home loans has increased over the years, owing to the increase in disposable income and declining rate of interest, you still need to crack the math of home loan eligibility. Home loan eligibility is a vital metric that lenders gauge to analyze the maximum loan amount to be offered to a potential borrower. But let’s begin with understanding what is home loan eligibility.
What is Home Loan Eligibility?
This is defined as the maximum capital a borrower can get as a loan. It is based on several factors including age, source of income, repayment capacity and credit score. While a borrower can check the home loan eligibility on the lender’s website, there are various tips to increase the eligibility by several notches. What are they?
Have a Good Credit Score:
Lenders take a close look at your credit score to judge your creditworthiness. Credit score, also known as CIBIL score, is a three-digit score ranging from 300 to 900. A high credit score establishes you as a responsible borrower and expedites the application process. For a good credit score (above 750), make sure to:
- Pay existing dues, including that of credit cards, on time
- Keep debt-to-income ratio low
Also, keep a close eye on your credit history report and rectify errors in it, if any. With a good credit score, there are chances of availing the home loan at a competitive rate of interest. Building a robust credit score requires judicious financial habits that can help you plan your finances better while applying for a home loan. A low rate of interest brings down the EMI and ensures your finances don’t get stretched during the loan tenure. The table shows the difference even a 1% rate of interest can make to your home loan EMIs and interest payable.
Make a Higher Down Payment:
No lender will finance the entire purchase value of your home. Most lenders approve 80 to 85% of the property’s value as a loan. You need to pay the remaining amount as down payment. When you make a higher down payment, it significantly increases your home loan eligibility. Also, higher the down payment, lower is the home loan amount. This brings down the EMI and helps you keep a tight lid on the interest payout. Accumulating a higher down payment amount makes you more conscious of your finances and investments. It forces you to cut down unnecessary expenses and you make an honest effort to save. Cutting discretionary expenses also adds to your income and enhances your home loan eligibility.
Avoid Frequent Job Changes:
If you are a salaried individual, changing your job frequently can negatively impact your home loan eligibility and the loan amount. When you stick to one organization for a long period, it means a stable source of income. Also, declaring additional income sources underline your higher repayment capacity, which helps in the loan application process. It also improves your debt-to-income ratio that aids in achieving higher eligibility. Lastly, applying for a home loan shouldn’t be a rushed exercise. Use online Home Loan eligibility calculators to compute your eligibility and go ahead after due diligence. After you check home loan eligibility, take stock of your finances and search for reputed and credible lenders.
On the other hand, changing your jobs frequently paints a negative picture in the mind of lenders and they become skeptical about your repayment capabilities. So, make sure to stick to one firm for a decent period to boost your home loan eligibility. Sticking to a single organization for a long time makes you eligible for various benefits such as gratuity. You can use a portion of the amount received for down payment. Periodic appraisals increase your income, enhance your home loan eligibility, and help you repay the loan with ease.