5 Ways To Increase Your Home Loan Eligibility
Buying your home is a dream and you would not want it to shatter because your home loan eligibility turns out to be less than what you initially thought.
MakaanIQ lists five ways in which you can enhance your home loan eligibility:
Raise the tenure
This is the most effective way to improve your home loan eligibility. On a longer tenure, the principal and the interest rate remain the same; only the net interest outgo rises. The increase in the tenure raises the loan eligibility because the burden of equal monthly instalments (EMI) decreases and the ability to repay improves. For instance, if you plan to take a home loan for 10 years and realise at the time of the loan appraisal that the monthly EMI is higher than you can pay, you could ask the loan officer to increase the tenure from 10 years to, say, 20 years. This will reduce the monthly burden.
Pre-pay running loans
It is advisable to pre-pay your previous loans before you apply for a new one. While calculating your eligibility, banks take into account the EMIs you may already be paying. For instance, your monthly income is Rs 1 lakh. Your bank considers only 50 per cent of the income to calculate your home loan eligibility, so it means Rs 50, 000 will be considered to arrive at your eligible loan amount. Now, if you have another loan running for which the EMI is Rs 10,000, the credit officer will further exclude Rs 10,000 from the eligible amount from Rs 50,000. Now, if this monthly burden of Rs 10,000 was going to end in two months, you would not want it to affect your home loan eligibility. You might pay Rs 20,000 to pre-pay your existing loan and boost your home loan eligibility. Also, keep the foreclosure letter of your pre-paid loans handy at the time of applying for the new loan.
Share your loan burden
Another way of improving your eligibility is to include the income of father/mother/spouse or son. However, pre-check your bank's guidelines on who could be a co-applicant, before applying for the loan. Many banks do not prefer to give the loan to brothers and sisters as co-applicants.
For instance, your monthly income is Rs 1 lakh and you apply for a home loan of Rs 50 lakh. During the appraisal process of the loan, you realise that the monthly instalment is too high. You are married and your spouse is earning a monthly income of Rs 50,000. You could include his or her monthly income and the basis of loan eligibility would improve from Rs 1 lakh to Rs 1.5 lakh. That will reduce the monthly burden by increasing the eligible amount.
Additional boost to eligibility
Banks mostly calculate the loan eligibility on the fixed components of your salary. But, you can present bonus components and other incentives to improve your home loan eligibility. However, banks have varying norms on taking into account the income which is not a regular feature of your overall salary. For instance, many banks take into account only 50 per cent of the bonus or the 100 per cent of the reimbursements, if the fixed amount is being credited. The lender will always need supporting documents as a proof of this additional income. Similarly, the rental income can also be included to enhance the loan eligibility.
Maintain a good credit score
Keeping your credit score high is in your own hands. You can do so by paying monthly instalments of your running loans on time and getting this information updated on CIBIL. For example, if an applicant has failed to repay 12 monthly instalments of a loan on a regular basis, banks do not accept his loan application as a standard practice. It is advisable to clear previous loans before applying for a new one.