Four FIYs Before Taking A Home Loan

1. Are you eligible for a home loan?

The sanctioned loan amount, papers to be furnished and submitted, repayment period and even the interest rate depend on a number of factors based on which the bank or the lender calculates your credit score. Your eligible loan amount depends on this score. Bad loans, late or no repayments, current liabilities, property value, other liquid assets, years of service remaining, employer etc affect this score negatively and positively, apart from the main income. Lenders usually have an eligibility calculator for the applicant to check for himself his eligible loan amount and repayment period by giving some details like net income, years of service etc.

2. How is the repayment scheduled?

The repayment period, repayment installments etc depend on your monthly net income and number of years left in service. Every bank has a rule that the equated monthly installment (EMI) should not exceed beyond a particular percentage of the take-home pay. The longer the repayment period, the higher will be your EMI. Some lenders have specific packages for a home loan in which they give flexible payment options like compromised installments according to the change in your income, closure of a pre-existing loan, diversion of secondary income etc. There are other provisions like the applicants employed with a government service get additional repayment period including the retirement age, applicants belonging to some professions like doctors, lawyers etc get extra relaxation etc.

3. What property should be bought with a home loan?

The nature of the purchased property affects the sanction and amount of loan. Housing loans are given to purchase a house. The house can be for a residential purpose, rental purpose or investment purpose, the loan terms remain the same and only the tax rules vary. While buying already constructed house, its quality and age of construction matters to calculate depreciation. For some lenders, the age of the property can be bypassed by the current good condition of the building or apartment.

4. Do you get a tax benefit from home loans?

Yes, allowing relaxation in the income tax payable by you is one of the biggest attractions of a home loan. The tax reduction is usually separate based on the amount paid as the interest and the amount paid as the principal. Also, you can apply for tax exemption only after the submission of possession certificate or when the construction is complete, as evaluated by the lending firm.

Before applying for a home loan, make sure you have all the agreements and prior deeds in place and if you have a joint owner, make him or her as the co-applicant.

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