Postponing your home purchase with loan funding could result in your family being stuck with rented accommodation
In today’s world where living in a rented house is like a night mare. You have an option to start thinking of getting a home loan as early as possible in life. This has various impacts on one’s life which will be discussed in detail below. What could be the consequences if you get late in going for housing loan? What will be its aftermath? What if you will start early? Just read below to find out the answers of all your queries regarding housing loans.
There are two ways of approaching new home purchase and the funding for it – you can either plan for it well in advance or spend time regretting it afterwards. This is one scenario where adage works in reveres, i.e. you will repeat at leisure if you haven’t acted in haste. If you delay your purchase decision for any reason, rest assured the consequences will be quite sever. For starters with home loan rates on rise, you will definitely end up with a much higher repayment amount for the same home loan amount.
And if your income levels are not adequately high enough to justify that repayment amount, guess what – you may end up paying higher amount for a lower loan sanction. That would effectively mean paying more for less!
Waiting any further could be quite disastrous, because you may find your dream home completely unattainable after a certain stage of rate increases. The prospect of financing a new home could become virtually impossible. Most of us know that increase in home loan interest rates means having to pay a higher EMI. Were you aware that the rise affects your home loan legibility as well? While this fact may not register immediately, it’s really quite simple when u considers 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. While calculating your repayment capacity, the lending institution takes several factors into consideration. While the key item is obviously, your income, after aspects like your age, qualification, number of dependants, spouse’s income , assets, liabilities, stability and continuity of occupation and saving history.
For instance, the home loan has to be repaid before your retirement age, so the institution may agree to fund you for a shorter repayment period of five or ten years, instead of the standard 15 or extended 20-30 year tenure. Again, this will hike up the repayment equated monthly installment (EMI) amount and if the institution feels that you can not comfortably repay the amount borrowed at your present income level, the total loan amount sanctioned will obviously reduce.
Now add to this the sheer mental strain of finding a new home at regular intervals. As you must be well aware that not every flat owner extends the lease beyond two or three 11-month agreement. They are just not comfortable with the concept of a lessee residing in their house beyond a certain period of time, because getting them to move out afterwards becomes a problem.
Then consider the extra expense involved. Even if you do not have to shift house every 11 months the broker who arranged the deal will expect it two months commission even if you are just renewing the deal for the same place. Haven forbid if u do have to shift every 11 month think about the stain on your wallet – for the moving expenses and on your furniture – due to wear and tear that results in being moved from one place to another at regular intervals. More over think about the trauma that will cause to your children. Imagine how would the feel at being uprooted every 11 months never having regular friends sometimes having to change school if the new home isn’t within reach of there existing one sounds scary, doesn’t it?
So don’t put it off any more. Get your home loan as soon sanctioned at today rates and insure peace of mind in future.
Installment to income ration (IIR) is a term used by bands to calculate your loan eligibility. It is expressed as a percentage.
This denotes the portion of your monthly installment on your home loan. This figure is normally pegged at 40% but you vary on the basis of actual salary details, qualification, employer / business, years of experience, growth prospects and sources of other income.
For example , if the IIR is 40% and your Gross Income is $ 10,00 per month , then as per the IIR ration you will be eligible for a loan where the installment does not exceed $ 100/- per month (40% multiple by Gross Monthly Income).
LTV stands for the Loan to Value ration while LCR stands for the Loan to cost ration. They are terms used by banks to signify the loan amount that a person is eligible for on the total cost of the property. There is a limit on the maximum loan amount that a person can get for a property irrespective of the loan eligibility.
To conclude, it would not be advisable to go for a housing loan after a long time since you have started working. Better go for as early as possible for financing your housing needs so that you can take benefit at lesser rate, then unnecessarily paying the more amount for the same house. Purchasing sooner will reduce tension for the person who is living at rented house. Starting at early stage would also increase the chances of getting the loan amount higher then starting later and getting a lower amount.
So what are your waiting for? Don’t wait for miracle to happen, be on your marks, Get-Set and Goooo!!!!
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