You can easily increase your home loan eligibility by adding on a co-applicant
There are several instances where a person may miss out on a dream home because of a slightly lower income level, which denies them access to the necessary finance. But don’t worry; there are ways of getting around such problems. What you can do, is club the income of your spouse to increase the repayment capacity. In fact, the easy availability of home loans has clearly contributed to the growing trend of couples opting to buy their own flat at a much younger age. The actual home loan amount sanctioned by a lending institution is determined after taking into account factors like repayment capacity, age, educational qualifications, stability and continuity of income, number of dependents, co-applicant’s income, assets, liabilities, saving habits, etc.
Here’s how it works. If you have a monthly salary of Rs. 18,000 and decide to opt for a 15-year fixed rate home loan at an interest rate of 8.5%, calculated on annual rest basis, you would be eligible for a loan of about Rs. 8,07,000 with an EMI of Rs. 8,098. Add your spouse’s monthly salary Rs. 7,000 to the equation and your eligibility rises to Rs. 11,11,000!
Similarly, with just your own salary of Rs. 18,000, you could enhance your eligibility amount to Rs. 9,55,000 by opting for a 20-year tenure instead. However, clubbing your spouses Rs. 7,000 salary in your application would further enhance your eligibility to Rs. 12,93,000!
Having a co-applicant also helps to cope with another factor – rising home loan rates. Most of us know that an increase in home loan interest rates means having to pay a higher EMI. But were you aware that the rise affects your home loan eligibility as well? While this fact may not register immediately, it’s really quite simple when you consider it step by step. The interest home loan rate goes up; therefore, your total repayment amount also increases to that extent. And since the only thing in the equation that hasn’t gone up is your income, your repayment capacity, based on which they calculate the eligibility amount, comes down slightly.
Let us understand how this works with a hypothetical example. If you have a monthly salary of Rs. 18,000 and decide to opt for a 15-year fixed rate home loan at an interest rate of 8.5 %, calculated on annual rest basis, you would be eligible for a loan of about Rs. 8,07,000 with an EMI of Rs. 8,098.
However, if the interest rate increased by just 0.5 % to 9 %, your eligibility would reduce to Rs. 7,89,000 for the 15-year tenure loan, while the EMI would rise marginally to Rs. 8,157.
A joint application to buy property would probably enable you to maintain the same level of eligibility even if the home loan rate increases by a few basis points.
Source: DNA Newspaper
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