There were two friends, Sunny and Bunny. They always cherished to have a house of their own; however in such times for a single earner it is indeed difficult to build a home especially in a metropolitan city. One day Sunny told Bunny that his company has given him an opportunity to work in London for 2 years. After hearing this Bunny immediately asked, what about his family. So Sunny said unfortunately he would be going alone to London as his main aim was to save some money so that he could buy a house. On hearing this on one hand Bunny was happy for his friend but on the other hand was wondering would he ever be able to own a house. After seeing him so worried one day Bunny,s wife asked him what was troubling him. After hearing his concern, his wife advised Bunny to visit a financial planner and discuss what was in his mind. The financial planner immediately told him about Home Loan.
Yes friends if you are also in a similar situation and are in doubt about home loan eligibility then the article below can help you show a way out.
Financial markets and their terms and conditions keep on changing with time. Buying a house still requires loads of preparations in advance specially in terms of finances. Now day’s home loans have made life easier unlike in olden times. There are numerous finance companies and banks which are ready to provide a home loan based on their terms and conditions.
The home loan eligibility is calculated by financial institution keeping in mind the repayment capacity of the person who is seeking loan. The EMI is calculated by taking into consideration the duration of loan and how soon the person is willing to pay it off. This is again dependent on the gross income of the person who is applying for a loan. Higher the monthly income higher will be the EMI. If the applicant wants a lesser EMI then it is possible to spread the repayment for a greater duration. However it is advisable to repay of the loan as soon as possible as it helps in saving on interest.
While seeking a home loan there are few questions which haunt almost every applicant which are how much loan am I eligible for, what all documents need to be furnished ,Interest rates etc. The loan amount which may be granted for home purchase may depend on lots of factors which differ from bank to bank. However the most important factor depends on the applicants’ monthly income in order to find out the repayment ability. Another deciding factor is the cost of the property in question.Bank often takes into consideration the applicant expenditure
A general formula which is used is
Loan eligibility = Savings/monthly installment/number of years* monthly installment
Banks provide with higher loan to people who can prove higher repayment capacity. This is calculated by income minus the expenditure.
Calculation of expenses in general practice is a difficult activity and in some time may not even give accurate results. Therefore a work around for this is to use a percentage of the applicant’s income. This percentage may also differ for people with higher income keeping in mind that they have higher repayment ability.
For the convenience of people many financial institutions have a tool which is known as a loan calculator. This loan calculator helps in calculating the amount which would be made eligible for home loan.
The introduction of base rates, by RBI, is making home loan borrowers really happy. If they are linked to the base rate then it will save them a lot of future spending on the loan. If you want to shift to base rates then you can do that too by applying to the bank. RBI is bringing out another rule to prevent banks from charging any fee for the shifting. The base rate is a more logical interest rate system that can be calculated systematically. This will allow borrowers to understand the interest rates more clearly. It will become easier for them to compare different banks to understand which of them are offering a clearer interest rate. It may not lower down the interest rate for all bowers. The big corporate institutions may find their loans to have increased interest rates. As per experts, you must shift to base rate anyway. You will then have a clearer idea about everything going on about the rates. The rate shifting will not be a problem anymore with the base rate.
This article is written by Mr. Mayank Gupta who blogs at NineMillionDollars.com which provides personal financial planning services.