Buying a home is a significant undertaking. It requires meticulous research, careful planning and thorough checking before the buyer can be at peace. One of the major aspects of purchasing a home that worries buyers is with respect to taking home loans for the same.
Irrespective of whether or not you can afford the purchase with your savings (which is rarely the case), one is usually advised to take a home loan to spread the commitment over a few years. What then follows is nerve-wracking analysis of each bank’s home loan and deciding on the right one. In the midst of all this, it is also important to ensure that you can maximize your eligibility for a home loan or qualify for the maximum amount of home loan possible. In the midst of all this, it is also important to ensure that you can maximize your eligibility for a home loan or qualify for the maximum amount of home loan possible.
So how can one improve home loan eligibility? Here are some ways:
Increase loan tenure
This is probably the oldest tactic in the book. The logic is that when one increases the tenure of the loan, the EMIs are reduced. Lower EMIs then boost the borrower’s loan eligibility. However, this needs to be thought through based on each individual’s circumstances and preferences
In this option, individuals can opt for step-up loans which essentially mean that the EMIs in the first few years will be low and then consequently increased for the remaining period. This again lends to higher home loan eligibility when calculated with the lower EMIs in question.
One mistake that a lot of people make when calculating their home loan eligibility is not taking into account the variable aspects of their pay such as performance-related income and other monetary perks. You may notice that once you include these components as well your loan eligibility is instantly boosted
Prepay existing loans
If at the time of approaching your banker for a loan, you already have a loan in your name (i.e. car loan, personal loan etc.) it could bring down the amount your eligible to borrow for the home purchase. One way to fix this is by pre-paying any existing loans you have in part of in full
Banks sometimes have tie-ups with large multinational corporations wherein they offer the employees of said corporation some benefits to taking a home loan. These could be in the form of lower interest rates, waiving of processing fee and so on. It would be prudent to check with your banker if any such offers are available to you to utilise. Given that RBI reduced the interest rates last year, it is likely to encourage a lot of prospective buyers.
This article first appeared in The Hindu.