November 8, 2022
Chances are that if you are in the market for a new property this festive season, you are also on the lookout for a feasible home loan option that supports your desire to buy a new house without drilling a hole in your savings. This is an achievable feat if you invest the right effort into narrowing down and selecting the appropriate lender for yourself. However, many home loan aspirants find themselves at a loss right at the beginning, not knowing what parameters to consider while researching their home loan options.
Home loan applicants should understand that while housing finance is meant to simplify the process of owning a new home, allowing you access to a sizeable credit line to support your home buying budget – it is a considerable financial obligation that can often stretch over a few decades. To keep up with a long-term repayment plan without endangering your finances or other investment plans, it is important that your home loan request is in line with your repayment capacity – its affordability being of utmost importance to your future as a home loan borrower.
In this article, we explore how aspiring home loan borrowers can assert the viability and affordability of their home loan bid before applying – ensuring that they make the right financial choice that is approved without any hassles – given its high eligibility compatibility.
Factors That Determine Home Loan Affordability
Naturally, your home loan affordability is linked directly to your income sources and ongoing obligations, but these aren’t the only aspects that are considered at the time of taking stock. Here are some of the factors that help assess the feasibility of your home loan.
● Applicant’s Age: The applicant’s age is not a direct indicator of their repayment capacity because an individual’s financial stability differs from case to case – and cannot be a blanket age-related judgement. However, lenders prefer younger applicants within a certain age bracket with a longer work tenure ahead of them. This could imply that senior applicants closer to retirement may not be able to commit to a long-term repayment plan if their future income prospects are not so bright. Ensure that you consider your age when
determining the right home loan amount.
● Income and Stability: This is a direct contributor to your repayment capacity, and thereby your home loan affordability. The amount you earn every month, how fixed that income is, and your other sources of income decide how viable it will be for you to repay a loan amount of the size you want.
● Debt-to-Income Ratio: Even if your monthly income is sufficient, concerns around your repayment capacity won’t end there. Lenders also consider your ongoing debt obligations and other bills you are liable to pay, calculating the EMI feasibility out of your remaining
monthly budget. If you are already servicing other sizeable loans, or are responsible for more bills, it might dissuade lenders from extending a sizeable sum to you, given your limited fund availability. Ensure that you don’t bite more than you can chew – as paying
home loan EMIs at the cost of your family’s finances is not advisable in the long run.
How to Decide the Right Home Loan Amount?
One can rely on their instinct and manual calculations to determine their ideal home loan amount, but nothing can insulate them against unpleasant surprises, such as a home loan rejection, like a housing loan EMI calculator. Here is how using an EMI calculator can help:
● Pre-empt your future EMI amount
● Help in repayment preplanning
● Maximise your home loan eligibility
● Avoid home loan rejections
The tool is hosted online, and free-to-use for everybody on the internet, with no caps on the number of times it can be used. While each calculator build can differ in terms of the way they work, broadly, one can use it through the following steps:
1. Enter your desired home loan amount
2. Enter your preferred repayment tenor
3. Enter the current home loan interest rate
Based on the information you key in, the calculator tool projects your tentative EMI amount, and even shows you a projected repayment schedule, that can help you plan your repayment pitch before you apply for your home loan.