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4 ways to increase your home loan eligibility

Last updated on: May 17, 2013 18:33 IST

4 ways to increase your home loan eligibility

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Joseph Samson

Simple to follow, these tips can go a long way in increasing how much home loan you can get.

A boom in the retail sector has seen a huge increase in the home loan interest rates over the past four years. On cue, home loan rates have doubled over the past four years. The problem of inflation has also had a negative effect on the consumers as the fixed and the floating rate of interests have soared to an alarming degree. This in turn has certainly affected the loan eligibility for home loans in India. This has also led to borrowers re-evaluating their options to avail new eligibility criteria.

At this time, it is important to understand how to enhance your home loan eligibility. Given below are some ways which can help you in your endeavour:

1. Increasing the home loan tenure

The easiest method available to increase your home loan eligibility is by taking home loans for the maximum tenure. As an example, let us consider an individual who earns a monthly salary of Rs 60,000. S/he decides to purchase a house, and for that she takes a home loan.

After deducting a monthly expenditure of Rs 35,000, the individual is able to save Rs 25,000. Undoubtedly, s/he will use her/his savings for repaying the loan in the form of equated monthly installments (EMI).

Now, let's consider that the installments for a home loan of Rs 1 lakh come at an interest rate of 12.5 per cent. If the loan is taken for tenure of 15 years, the EMI calculated per lakh stands at Rs 1,232.50. For this data, the individual's home loan eligibility will be Rs 20.3 lakh.

However, it is possible for the same individual to increase her/his home loan eligibility by around Rs 2 lakh if s/he can extend his tenure to 20 years.

Assuming the same rate of interest, that is, 12.5 per cent, the EMI on every Rs 1 lakh loan for 20 year tenure turns out to be Rs 1,136. Consequently, the home loan eligibility comes to Rs 22 lakh.

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2. Don't rush towards a home loan

Less information is as harmful as wrong information.

The importance of this statement lies in the fact that today there are many banks offering different varieties of home loans to individuals. Nowadays, almost every bank is offering a home loan with the repayment period of maximum 20 years.

The next important thing to consider after the tenure is the rate of interest. For that reason, it is always advised, never to rush to avail a home loan.

It is better to carry out a research regarding the available home loan schemes and to study the market meticulously to make the best use of what many banks and housing finance companies are willing to lend before making a choice.

The next decision that an individual needs to make is to choose between floating and fixed interest rate on home loan, which is largely based on your personal preference and knowledge about the both.

However, floating rate home loans are always priced higher than fixed rate home loans.

Also, it might not be necessary that the first scheme being presented by a bank employee would be the best for an individual.

Hence, always ask questions and enquire about the various schemes available with the bank, and then make the final call.


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3. Repay all outstanding loans

A good credit report card always helps.

It is highly advised by bankers that before going for a home loan, an individual should repay all other pending outstanding loans.

Any loan taken by an individual like car loans or personal loans, taken on any bank, needs to be paid up to date. This adds to the ability to repay of the individual and the lending institution takes a greater interest in issuing a home loan.

Also, these days, any bounced cheque or any late payment, is not missed by banks. Hence, its important to be thorough with the repayments.


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4. When in need go for a joint loan

If one spouse's income comes short of the required amount set by the bank to issue a loan, then several banks and housing finance companies have come up with a joint loan option.

This option guarantees a loan for both the husband and wife earning a combined income of Rs 1 lakh per month. The choice for a greater loan is available with either husband or wife.

These are simple to follow tips, and can go a long way in increasing the home loan eligibility of an individual. So, buckle up and get ready to purchase your home loan smartly.


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