How to increase your home loan eligibility

Sun Oct 28, 2012 11:37am IST

Labourers are silhouetted against the setting sun as they work at the construction site of a residential building in Hyderabad October 5, 2012. REUTERS/Krishnendu Halder

Labourers are silhouetted against the setting sun as they work at the construction site of a residential building in Hyderabad October 5, 2012.

Credit: Reuters/Krishnendu Halder

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While looking for the right home loan to buy a dream house one may come across a situation when the total amount that one is eligible for is insufficient. It is such situations that one needs to work out ways and means to increase the total eligible amount in order to be able to acquire the right home that one desires. There are several means which if combined can have a significant effect on this total eligible amount for home loans. With careful research and diligent planning one can easily increase his home loan eligibility.

Longer Tenure: The eligibility is calculated on the basis of repayment capacity of the applicant on a monthly basis. By increasing the tenure the EMI per Lakh of loan reduces and hence the applicant can now borrow more number of Lakhs with the same monthly repayment capacity. However increasing the tenure implies that one will ultimately end up repaying more as interest will be levied on a longer duration.

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Clear Other Outstanding loans: Other outstanding loan liabilities of an individual drastically reduce his loan eligibility as the EMIs being paid towards those loans are deducted from the monthly repayment capacity. Thus repaying these loans from other sources will greatly move up the total amount for home loan. However this is only possible if the outstanding amount is within the reach of the individual. Up to 15 - 18 remaining EMIs is considered repayable under normal circumstances.

Combining Incomes: When it is apparent that the income of the individual is inadequate to get him a loan that he requires to buy a house then it is advisable to combine the incomes of other family members which will have a positive impact on his repayment capacity. In such cases the acceptable combining of incomes income include that of spouse, father, mother or children. The net increase in eligible amount can be many folds in such scenarios.

Opt for Step Up Loan: These are loan products that take into account the increase in incomes of individual over the period of loan repayment. This kind of a home loan has lower EMI in the initial stages which is increased in a step wise manner as the income of the burrower increases with time. Thus the total amount eligible is now calculated on the basis of a higher income that the current earnings which can increase the amount substantially. This a smart move for young professional who want to invest in properties right from the beginning of their earning career.

Include all perks: While applying one can include the various perks that the employer provides in addition to the basic salary as net income. This will have a positive impact on the repayment capacity thus increasing the eligible amount for home loan. These perks may include performance linked bonus or additional pay for overtime etc.

However when attempts to enhance the total amount that he is eligible for in taking a home loan there has to be a practical consideration of the actual repayment capacity. Availing a bigger loan to buy an expensive home may end up in creating tight financial conditions for individuals who hike up their eligibility falsely.

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