How to compute your home loan eligibility ?

The eligibility of a housing loan is determined on the basis of borrower's repayment capacity, which, in turn, depends upon his income and other factors such as age, qualifications, number of dependents, stability and continuity of the income.

Besides the proposed owners in respect of which he is seeking financial assistance will have to be co-applicants.

However, all co-applicants need not be co-owners. Income of the spouse can also be clubbed if he/she has been made the co-applicant. The housing finance company can consider all the income accruing to the applicant on a monthly basis, i.e. all the recurrent credits (basic salary, HRA, other allowances but not the lta and medical), any rental income that he is getting and the savings in rent payment which might accrue to him on account of his moving from a rented dwelling to self-occupied property.

In short, the calculation will be as per the applicant's net cash inflows, less expenses and commission for the salaried class, and as per his profit-and-loss account for the self-employed or a private company (net profit + 2/3rd depreciation+ directors' remuneration).

An example: an individual has a salary of rs 3,00,000 p.a. taking all factors into consideration, an hfc decides that the individual has an annual repayment capacity of 1/3 of his income, meaning rs 1,00,000. this would work out to emi capacity of about rs 8300 per month.

Once the emi capacity of the person has been estimated and the tenure of loan repayment is known, the hfc decides on the amount of the loan it can provide to a person. this is done with the help of an emi table. In this case let's take the repayment schedule as a period of 10 years. going by his emi capacity of rs 8300, this individual can go for a loan of about rs.5 lakh for a period of 10 years. Here the emi works out to rs 8145 per month at 14.5 per cent compound interest rate on the annual, rest on a loan of rs 5 lakh. Some hfcs have plain vanilla deals for professionals such as cas, doctors, mbas and architects: it is 1-2 times the gross receipts.

It also depends on the purpose for which the house loan has been taken. It can be for purchase, construction, extension or renovation of the house property. It is also dependent on the tenure that the person requires the loan for.

Source: Economic Times