Loan Eligibility Calculator.
How does your Loan Eligibility increase any banks any specific housing loan offer or scheme? It increases because one does not have to pay the principal amount in the initial years (moratorium period). This automatically increases the loan eligibility. Let’s consider an illustration:-
Suppose one’s monthly income is Rs 1 lac. They have no loan currently. They have applied for a home loan. The bank, let’s suppose is comfortable with FOIR (Fixed income to obligations ratio) of 40%. Hence, the bank won’t offer one a loan which makes them pay an EMI of more than Rs 40,000 per month. Assuming one is looking at loan tenor of 20 years and the current home loan interest rate is 10% p.a., the maximum loan (under a regular home loan scheme) that they can get is Rs. 40-41 lacs. However, under regular schemes, one might have to pay principal and interest together. It’s best to go for schemes. And also refer to CIBIL to calculate accurately your home loan Eligibility.
The bank is betting on the fact that one’s salary is bound to increase during the moratorium period and you will be able to afford when full EMI come into force. This is essentially the reason why the home loans are generally for salaried professionals aged between 21 and 45 with minimum two years of experience. Banks have much better clarity of income potential with salaried employees.
That’s the only difference between regular home loans and well schemed home loans . There is no other benefit. In fact, one should never opt for home loan schemes for any other reason. If the loan amount under regular scheme is enough for you, there is no need to take loan under this scheme.
While availing your home loan from any bank, please be aware of these things listed below. These are applicable for and to any borrower borrowing from any bank.
What every Borrower needs to be aware of? The power of compounding works in the reverse direction in case of loans. Hence, the longer one takes to repay, the more interest (in absolute terms) they will have to pay.
Let’s consider an example:-
Suppose you have taken a loan of Rs 50 lacs for 20 years under a regular home loan scheme. Let’s assume the interest rate stays constant during the term of the loan at 10% p.a. You will pay total interest of Rs 65.8 lacs. The EMI will be Rs 48,251.
If you borrow under a scheme of a home loan scheme with total tenor of 20 years and moratorium of 5 years, you will total interest of Rs 71.7 lacs. For the first five years, you will pay Rs 41,667 per month. From 6th year till the end of 20th year, you will have to pay Rs 53,730 per month. You can notice the sudden jump at the end of moratorium period. Schemes come with benefits and risks.
Alternatively, if you borrow for 25 years (with moratorium of 5 years), total interest amount goes to Rs 90.8 lacs. You pay Rs 41,667 per month for the first five years. For the next 20 years, you pay Rs 48,251 per month.
Do note the cost of loan in all the cases is still 10% p.a. The total interest amount is changing because the repayment structure is different in the three cases shown above. This shows, unless one is in requirement of higher loan eligibility, you should not opt for schemed home loans. Another concern is that you may end up borrowing more than you can afford to repay. The entire premise behind such a scheme is that over a period of time, your salary will increase. In case that does not happen, you will find yourself in big trouble when the full EMI payment begins.
Thereby, we can conclude, saying :-
There is nothing wrong schemes. Any scheme may actually offer a possibility to some of the borrowers to purchase their dream house, which they would not have been able to purchase under a regular home loan scheme.One should simply depend upon CIBIL’s calculator for an assumption. However, there is no need to opt for home loan schemes unless one is looking for a higher loan eligibility. As with any kind of debt, one should need to make sure that they do not borrow beyond their means. There is only a moratorium on principal repayment for a few years. You still need to repay the loan, you know.
When it comes to home loans, bank’s interests are always safeguarded. If one cannot repay, they can always auction your house to get back their funds. They can afford to take some risk. Therefore one cannot afford to be reckless. The underlying assumption behind getting and availing of a higher loan eligibility is that your salary will grow during the moratorium period and you will be able to afford this when the moratorium period ends. You have to doubly sure that will happen. Can you?Nobody can answer this question better than you can.
Hence, it is best to stick to what one can afford, and not jump too high.
We hope you have got all the information you needed.