ELIGIBILITY

How much Home Loan can I get? Is the bank lending me required amount? What are the criteria for arriving at the loan amount? Is there any way out to receive required amount? Will i be proud owner of world class flat in Hyderabad? Your worries will be addressed here.

Loan eligibility is based on two important parameters.

• Your financial strength or repayment ability. That means, amount of Equated Monthly Instalment (EMI) you can afford
• Value of the property and the percentage of the margin

You will get the lower of the two. For this percentage formula, some banks consider your gross salary and some are considering net salary. However, most banks consider gross salary only.

Your capacity to repay the loan on equal monthly instalments is based on your Income and expenditure habits… Normally, banks will decide the loan amount, so that the EMI is limited to 50-60 percent of your total Income. Take for example, your net monthly income is Rs. 25,000 and your regular monthly expenditure is Rs. 15,000, banks assume that you can easily pay Rs. 10,000 towards EMI for your home loan.

Now, some banks, i.e. State Bank of India is offering Home Loans at 8 percent rate for the first year. If you have chosen 20 years term, at 8 percent EMI for one lakh will be Rs. 837. So bank will not hesitate to sanction a loan of Rs. 11.94 lakh.

If the interest rate is 9 per cent, EMI for one lakh will be Rs. 900. Then, your maximum eligibility will be Rs. 11.11 lakh only.

Obviously, the higher the rate of interest, the lesser will be the loan amount. Other way, the higher your income, the larger will be the loan eligibility. As mentioned earlier, it will not be more than 80-85 percent of the property value.

It is impossible to ascertain the level of expenditure for every individual. That is the reason why banks will have a pre determined percentage of income as being available for EMI payments. This is based on household expenditure data prepared by Central Government authorities. For example, banks may determine that, if your income is Rs. 25,000 per month 40 percent of that (Rs. 12,500) is available for EMI payment. Based on this, they calculate the eligibility amount. This percent will increase directly in proportion to your income. The rationale behind this approach is that, the people with higher income should be able to spend higher percentage of their income for repayment of home loan. Hence, the Home loan finance banks have slabs as given below:

• Rs. 15, 000-19,999 – 35 %
• Rs. 20,000- 24,999 – 40 %
• Rs. 25,000-29,999 – 45 %
• Rs. 30,000 and above – 50 %

As per the above slab, if your monthly income is 28,000 your eligibility: 
Amount available for EMI = 45 percent of 28,000 = 12,600.
Loan eligibility at 8 percent interest rate = 12,600/837=15.05 lakh.
If your income is Rs. 50,000 Your loan eligibility will be calculated as below.
Amount eligible for EMI is 50 percent of Rs. 50,000 = 25,000.
Loan eligibility at 8 percent interest rate is 25,000/837 = 29.86 lakh.
Loan Term also will have an impact on the eligibility. All the above examples are for a term of 240 months. 
If you chose 18 months & if your income is Rs. 50,000 amount available for EMIs is Rs. 25,000.
EMI for one lakh at 8 percent rate is Rs. 956.
Loan eligibility will be 25,000/956 = 26.10 lakh.

Every rupee you receive from the employer may not be considered to calculate your income. If you are a salaried employee, normally, Basic, Dearness Allowance (DA), House Rent Allowance (HRA) will be considered to calculate your income. Certain items may not consider as a part of your income.

• The bonus, LTA- Leave Travel Allowance, Over Time Allowance, Medical Reimbursement etc, which are not regular in nature, cannot be accounted for EMI payment. Hence, some banks may not consider these allowances for eligible income calculations.
• If the Over Time or Night Shift Allowance is proved regular in nature, they may be considered for income calculation.
• Interest on Bank Deposits, Small Savings, dividend on Mutual Funds, Equity Shares is also not considered. Deposits may be withdrawn to pay the margin money. Dividend on Mutual Fund Units and Equity shares may not considered to regular income.
• Part Salary paid through vouchers, Travelling/conveyance, entertainment allowance also may not be considered.
• Rental Income may come under regular income, but needs documentary evidence. If you show this income in Income Tax Returns, rental income will be considered.

By now you may have an idea about the amount of loan you are eligible for. This may not be sufficient to purchase prime real estate property in Hyderabad. Is there any way to get required loan amount?

Clubbing. Is the answer. Loan eligibility is calculated by clubbing your income with that of your close relatives.

All the banks allow clubbing of the spouses income. In fact certain banks make it mandatory to take the spouse as the co applicant.

Banks allow parents and children to be Joint Applicants or Co borrowers. No bank is allowing father and daughter to be co applicants. Only smaller number of banks allows brothers to be co applicants. The reason is obvious. After getting married daughter will move to another home and here income will not be available for repayment. Disputes may arise between co applicant brothers, income stops getting pooled for repayment.

When you are applying with co borrower, his age is also considered for deciding loan term. Banks ensure you complete the loan repayment before you get retired. If you are aged 35 and you are going alone for Home Loan, you can easily get a term of 20 years.

But if you apply with your father who is 45 years old, if he retires at 60 years, you will not be eligible for 20 year loan. Instead, you are allowed for a maximum of 15 year term.