A personally-owned housing property is most people’s dream, especially in India. A home is a matter of security, pride, and safety, and therefore, most people, at some point in their lives, opt for a home loan because more often than not, almost nobody has liquid funds to pay for a house upfront. Also, a home loan is a smarter choice, in which instead of depleting all the savings all at once towards a house, one pays for it over a period of ten to twenty five years while growing one’s savings, saving taxes, and securing one’s future.
However, every person based on his or her existing assets, income, and spending habits is eligible for a different sum of rupees as home loan as compared to another. Thus, a home loan eligibility calculator comes in use to understand one’s housing loan eligibility. Further, this eligibility is determined by creating a risk profile of an applicant and assessing their probability of successful repayment of the loan. So, what are these housing loan eligibility criteria or parameters? And choose best rate for a line of credit. Let us explore the factors below.
Understanding Factors for a Home Loan Eligibility Calculator
- CIBIL Score: CIBIL keeps record of all Indian PAN card holders’ credit history—past debts, loans, debt repayment schedules, faults in repayment (if any), credit exposure (different types of outstanding dues at a point in time), current outstanding loans (including credit card payments dues), duration of credit history, and so on. It is important to keep one’s CIBIL score as high and clean as possible.
- Personal Income: A person’s current income, income history, and future income projections (based on the type of employment, risk factors involved in profession, historical rise in income over the years) is intuitively the most significant part of one’s home loan eligibility. The better your income and income projections, the higher would be your home loan eligibility.
- Expenditure Patterns: These include current outstanding debt obligations (credit card dues), existing loans, diversifications in investment portfolio, saving habits, and such other financial behaviour of a home loan applicant.
- Age of Applicant and Duration of Loan: This is a significant factor for home loans for typically a home loan’s tenor is ten to twenty five years. Thus, the younger an applicant is at the time of their application for a home loan, higher will be their eligibility.
- The marketability of the property in concern: The credibility of the builders, their credit history, the reputation of the realty firm, the location of the property, the market value of the property, have a huge impact on the eligibility criteria for a home loan. Furthermore, home loan lending institutions which have collaborations with certain builders tend to offer a better loan prospect for the property to potential buyers.
Finally, everything comes down to how financially lucrative a property is even for the lending institution lest it may need to sell it in the market in case of payment default or a loan becoming an NPA. A property whose value is likely to increase over time is a safe and lucrative option for the lender.
With the help of an example, let us understand the above factors for a housing loan in India.
Housing loan eligibility calculator
If you have a monthly income of Rs.2 lakh, with nil outstanding debt, a CIBIL score of 750, you are eligible for a home loan of Rs.1.5 crore approximately at 6.75% rate of interest for a 20 years repayment schedule.
Now suppose with the same monthly income of Rs.2 lakh and 750 CIBIL score, you have an average monthly outstanding credit card due of Rs.50,000, you are likely to be eligible for a home loan of Rs.80 lakh for 20 years at 6.75% rate of interest. If your CIBIL score is below 700, risks in profession higher, income projections lower, and so on this, eligibility is likely to be further affected.
Things to Keep in Mind If You Are in the Market for a Home Loan
If you are looking to apply for housing loan in India, and have understood the home loan eligibility calculator, it will help to keep the following pointers in mind:
- Keep a high CIBIL score of at least 700.
- Reduce your debt burdens, i.e. pay off your outstanding credit card dues in full (and not just the minimum amount) every month. Improve your repayment history for at least a year if you have had an erratic repayment past, before applying for a home loan.
- Diversify your investment portfolio into a mix of risky and non-risky assets. Equity is a risky asset whereas an FD or a PPF is a non-risky asset.
- Try to opt for a property by a reputed builder. It might cost you a bit more but it will help you in your home loan eligibility, and help you keep your peace of mind over the next two decades.
- Make sure you don’t exhaust all your savings towards a home. Take a smaller house but have a better life!