Home loan is a good idea for the salaried persons these days. Even if you have enough money for buying a home or flat, it is advisable to get a home loan to some extent so that you can derive advantages in terms of tax exemption. Further, you can save some amount of money while paying back the loan. In this article, we try to give you an idea on the amount of home loan you can get.
One Srinivas is working as a software engineer and getting a monthly salary of Rs.80,000. Now, we can estimate the amount of home loan he can get. It is important to know the total savings in the monthly salary, keeping aside all his monthly expenditure. Assume that he is saving Rs.60,000 by spending only Rs.20,000. But the home loan organisations do not take into account the savings. They have their own procedure for calculating the monthly expenditure of a salaried person. As per their procedure only, the amount of home loan one can get will be calculated.
Changes from bank to bank
If a bank considers the expenditure of Srinivas as half of his salary, then the monthly saving of him will be Rs.40,000. If the loan amount is Rs.1 lakh @ rate of interest 10.5 percent and time period of 20 years, then the monthly instalment will be Rs.998 for Srinivas. Based on this principle, If Srinivas is sanctioned a loan of Rs.40 lakhs, his monthly instalment will be Rs.39,920 (40 x 998). Several banks put the savings in salary at 35 to 40 percent of the total salary. In this way, one can have an understanding on how much home loan one can get.
Based on income only
The first thing any bank considers while giving a loan to its customer is the income he gets. Banks consider that high salaried persons can pay back even high loans very easily. Salaried persons have an edge over self-employed persons, business persons and others in the aspect of regular monthly income. If a business person earns a monthly income of Rs.1 lakh and a salaried person earns the same amount, the banks prefer the latter to sanction the loan.
While sanctioning the loan, the banks ask its customers to produce pay slips of the last one year, IT returns of the last three years and bank statements of the last six months. After looking at all these things, the banks will come to a final conclusion on the income of the customer and his monthly expenses. Travelling allowance, housing allowance and medical allowance are not considered as part of the income. Some persons show their income as less fearing Income-tax. But they have to keep in mind that they will get lesser loan if they show reduced income in Income-tax returns.
Age, one key factor
Banks take into account the age of its customer while sanctioning the loan. If a 30-year-old person is sanctioned the loan, he can safely pay back the loan amount in the next 30 years (by the time of retirement). If a 50-year-old person is sanctioned the loan, there is only 10 years for his retirement and paying back the loan amount is difficult for him. So,such persons get lesser loan.
Before sanctioning a loan, the banks will have a look at the past history of the person who is seeking the loan. The banks try to know whether the person took loans in the past, how much time did he take to pay it back and other related issues. If the past history is not proper, the banks may deny the loan to such the persons or give lesser loan than the requested loan amount. For example, a bank may sanction only Rs.20 lakhs as loan to a person even if he is eligible for Rs.40 lakhs as per his salary.
About the job
The banks look at the field in which the applicant is working at the time of seeking the loan. They will also consider other issues like whether his job is a permanent or temporary one. They will hesitate to sanction the loan to a person if the he is working in a field which sees frequent ups and downs. Further, chances of a person getting a loan are brighter if the maintenance of his account for a long period is satisfactory.
Interest rate changes
Banks decide their rate of interest on home loans depending on the company the applicant is working in. If he is working in reputed companies, the banks fix a lesser rate of interest. The rate of interest will be different for the employees working in small companies.
Want more loan?
If you want more loan, you have to keep in mind some key things. It is better to get a loan for a long term. This is because the monthly instalment to be paid depends on the term only. For example, you have decided to get a loan of Rs.20 lakhs with a term of 10 years. You can get the loan of even Rs.30 lakhs if you can extend the loan term to 20 years.
You are advised to pay back all the earlier loans before applying for the home loan. If you can do this, you can get more savings in your salary and have the possibility of getting more home loan. Otherwise, you can request an additional time period to pay back the earlier loan.With this, the monthly instalment to be paid will become lesser for the loan. Then, you can show more savings in the monthly salary and get more home loan.
Advantage with co-applicant
It is a wise decision to add one's life partner or either of parents as the co-applicant for the loan. With this, the chances of getting a loan are brighter. The banks take into account the income of both the persons. Along with salary, one can show the proofs of house rent, interest on deposits and other sources of income to bank officials so that you can get more amount of home loan.
This information is being given only to give you an idea about home loan. For more details, please be advised to visit the nearest bank and also financial experts.