Each year thousands of people apply for home loans – some with banks with whom they have a long-standing relationship while others after rigorous research find the bank or NBFC they feel is the right choice for them.
With the emergence of internet and all banks and NBFCs going digital the customers are now in a position to compare different lenders and choose the lender they want. The lenders have also provided their eligibility criteria online to make sure customers do not waste time. This way borrowers can concentrate only on the banks they are eligible for. One important factor that borrowers look for when comparing banks is the loan amount they are eligible and the interest rate.
The important factors that banks take into consideration when calculation loan amount eligibility are as follows
How old you are at the time of taking the loan plays an important role in deciding the loan amount. Many lenders provide loan tenures such that the loan ends at time of a person’s retirement i.e. 60 years for salaried person while it is 70 years of age for others. If you take a loan when you are 35 you will only get a loan tenure of 25 years, which in turn will affect the loan amount you are eligible for.
Salary is a very important criterion for a home loan. If you do not match the salary criteria stipulated by the lender your application will be rejected.
There could also be a scenario where though you have higher income your application could be rejected due to a lower disposable income which might not satisfy the loan EMI to salary ratio.
High level of debt or is already a loan guarantor
Home loans being a high value investment, also means that the EMI each month will be high. If an applicant already has debts that need to be repaid, then the loan application might be rejected.
Similarly, if the applicant is already acting as a guarantor for another loan then there is a risk that the other person might not pay their loan and will fall on the applicant who will have to pay the dues as a guarantor.
Loan Amount Eligibility Calculation
Consider Rajesh a 25-year-old MBA graduate working in a software company with a salary of Rs.50000 per month. Now banks assume that a person saves up to 30% to 35% of their salary. We are going to take 30% for this example, which means 30% of Rs.50000 is Rs.15000. All of Rajesh’s other EMIs (if any) will be removed from his savings. Here Rajesh does not have any other EMIs or loans. Thus, the amount of money Rajesh can pay as EMI is Rs.15000.
Now assuming the loan tenure as 30 years and an interest rate at 8% we can back calculate to the loan amount Rajesh is eligible for as Rs.2040000. This is just a rough estimate which will be useful for borrowers to see how much they can get as loan from various banks and how much they need to contribute.
The other thing to keep in mind is that 80%-90% of the loan amount can be financed by banks because on most cases a down-payment is required by house sellers/ construction workers to finalize the construction. Some banks offer a top -up loan for those who have already take a home loan, however the borrower must have completed six months since taking the home loan.