Planning a home loan

Determine the right amount
The next step will be to determine the amount of loan you can go for. While budget considerations are the starting point for decision-making about buying a property, it is may be a good idea to find out the extent of housing loan banks may offer. The loan amount sanctioned by banks depends on three important factors - borrowers' income, repayment history and the cost of the property. Broadly, banks lend up to 3.5-4 times the annual gross income as a home loan. The loan eligibility for a longer tenure loan will be much higher.

Different banks have different ways to calculate loan eligibility. Preliminary enquiries with a couple of banks will give a rough idea of loan eligibility from an income point of view. The lender also restricts the loan amount to around 85-90 percent of the cost of the property even though the loan eligibility based on just the income may be higher. Most lenders include the stamp duty and registration charges in the cost of the property while calculating this 85-90 percent.

Most banks lend on the basis of income of the borrower and spouse. However, it is possible to shop around for banks that that allows you to club the incomes of your other close relatives (parents , siblings, children etc) to increase your loan eligibility.

Repayment ability
The ability to repay a housing loan is based on the income and expenditure pattern. If your monthly income is Rs 15,000 and your monthly expense is Rs 9,000, then Rs. 4,000 can be considered as the sum you can pay as a home loan EMI.

Then, the loan eligibility is calculated as:
At an interest rate of 11 percent, the monthly installment of a Rs 1 lakh loan for a 20-year tenure is Rs 1,100. Banks calculate the loan eligibility based on a simple formula. Home loan eligibility in lakh is equal to the amount available for loan repayment divided by loan installment per lakh for the selected tenure (loan eligibility = Rs 4,000 divided by 1,100 multiplied by 1 lakh = Rs 3.63 lakhs) Larger the repayment capability, the higher will be the loan eligibility. When taking a loan, one must take into account the fact that interest rates fluctuate during the loan tenure. The fluctuation will impact the home loan EMI, whether one takes a loan at a fixed interest rate or floating interest rate. If the borrower is younger, banks are willing to give an extension on loan tenure but if the loan borrower is in 40s, the only option given is to increase the EMI. Therefore, determining the disposable surplus will go a long way in getting the right amount of housing loan.

thanks by :- economictimes.indiatimes.com