Your Home Loan eligibility is determined by your repayment capacity, taking into consideration, factors such as your
- Income
- Qualifications
- Age
- Spouse's income
- Number of dependants
- Stability and continuity of occupation
- Assets/Liabilities
- Savings history.
The most important concern of banks in determining your loan eligibility is that whether or not you are able to pay off the amount you borrow. The loan amount sanctioned depends on a host of factors. Primarily, it depends on your income and repayment track records. But besides that, the cost of the property to be purchased is also a deciding factor.
Banks determine your eligibility based on your repayment capacity and discuss about the loan amount up front. The eligibility for acquiring a home loan is augmented by clubbing income of your father/spouse/mother/son, by clearing your outstanding debts and by stretching your loan tenure. Salaried individuals can increase their eligibility by showing their performance linked income or bonus earned.
Do your own analysis and check the impact of your repayment of home loan on your monthly expenditure. As a basic rule, it is recommended that you make sure the EMI of your home loan do not exceed more than 40% of your gross monthly income. |
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Your ability to repay your housing loan is based on your income and expenditure pattern. For instance, if your monthly income is Rs 10,000, and your monthly expense is Rs 8,000, you can certainly pay Rs 2,000 towards any potential home loan you take. |
This amount can now be used as the installment amount and your eligibility can be reverse-calculated.
The following example will demonstrate the eligibility calculations:
At an interest rate of 9%, the monthly installment of a Rs 1 lakh, 20-year loan is Rs 900. Banks then calculate your eligibility using a simple formula:
Home loan eligibility in lakh is equal to the amount determined by the bank as available for loan repayment divided by loan installment per lakh for the selected tenure.
OR
Loan eligibility = Rs 2, 000/900 x 1 lakh = Rs 2.2 lakhs
Obviously, the larger your repayment capability, the higher will be your loan eligibility.
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In actual practice, however, it is difficult to estimate the monthly expenses of each borrower separately. Which is why banks use a pre-determined percentage of your income as being available for paying the loan installment, based on their past experience as well as available household expenditure data. For instance, a bank may assume that if your income is Rs 20,000 per month, 40 per cent of that (i.e. Rs 8000) will be available for repayment. Then, they calculate the loan eligibility accordingly. |
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You can also check the 'advanced home loan eligibility calculator' if you have the relevant numerical data at ApnaLoan.com/Home Loans. |
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