As its name suggests home loan is for purchasing or constructing the house that is offered by bank against the property. It is a secured type loan that is offered against the property or collateral. Usually, loan covers 80% of the property value and left amount is counted as down payment. In this regard, applicant’s eligibility is also an important point to consider which meant that if you are not eligible for the applied amount of loan, then your application will be rejected. Home loan eligibility tells that whether one is able to pay the borrowed amount or not. Your home loan eligibility is determined by considering the following factors:
• Income
• Qualifications
• Age
• Spouse's income
• No. of dependents
• Stability and continuity of occupation
• Assets/Liabilities
• Savings history
On the basis of home loan eligibility, one can apply for home loan. If we talk about the maximum amount that one can borrow, well that too depends on factors like:
• The purpose of the loan
• Whether it is for purchase of property or improvement or renovation
• Purchase of land for development
Home loan borrowing ranges from Rs. 2 lakhs to Rs 200 lakhs on the basis of your repayment capacity and eligibility. Maximum tenure for a home loan is upto 20 years in which loan must be paid back. If we are discussing about loans then we cannot avoid rate of interest as well. Generally every bank offers loan on 12.5% to 16% and it may vary also. The interest on loan is usually calculated on monthly reducing and yearly reducing balance method. In monthly reducing balance, the principal amount reduces every month as EMI is paid. However, in yearly reducing balance, the principal is reduced at the end of financial year. Well you must be thinking to pay your entire loan amount as soon as possible may be before the end of tenure. Well here it must be clear that when it comes to home loan then, it may cost a bit higher than you think. If you opt this option, then, a prepayment penalty is charged.