A Woman’s Guide to Taking A Home Loan
In the past 2 years, there has been an increase of 20% in loans taken by women! Increase in income levels and higher financial independence have resulted in more and more women taking loans and in fact borrowing larger amounts.
Is there something the women opting for home loans are doing right? By opting for a loan to buy their dream homes women are availing the following benefits :
Lower interest rates
Lower eligibility criteria
Lower Stamp Duty
So as a woman with a stable job and steady income if you have ever wished to own your dream home but not known how to go about it, this is your guide to taking a home loan.
For what can I take a home loan?
To buy/construct a residential property – a flat, apartment or bungalow
To buy a plot of land to construct a house on
To renovate/extend a house
To transfer an existing home loan from one lender to another due to better interest rates.
Am I eligible to take a home loan?
While applying for a home loan your income and repayment capacity are the most important factors. Most banks and non-banking financial corporations (NBFCs) have loan eligibility calculators on their websites to determine if you are eligible to take a home loan.
Eligibility criteria to take a loan*-
Age Bracket - 21 to 65 years
Occupation - Salaried or self-employed
Minimum salary/income – Rs 25000 per month
Minimum Credit Score - 750
Loan Tenure – 5 to 30 years
*These are the general criteria for most lenders as per our extensive research on various lenders. Most lenders give incentives to women borrowers
How can I improve my eligibility to avail a home loan?
Include an earning member of your family as a co-applicant
Repay existing loans and short term debts – Clearing outstanding loans, especially credit card loans helps improve your eligibility for home loans
Improve your Credit Score - A healthy credit score will help you get a better interest rate and tenure for your home loan (stay tuned for our article on How To Improve Your Credit Score!).
Save and invest regularly from your income.
Declare any other sources of income
Opt for a well-established real estate developer / real estate project.
What is the amount I can borrow?
The amount of home loan you can take depends on your income. The maximum loan you can take is up to 80% of the property value and the remaining will have to be a down payment. The EMI should not exceed 60-65% of your income. If you have a co-applicant, his/her income can be considered by the lender to increase the loan amount.
What is the tenure for which I should borrow?
Most lenders ascertain the tenure of the loan depending on the age of the borrower and the EMI that can be paid. Though the maximum tenure of a loan can be 30 years, we recommend you take as short tenure as possible so you do not carry liabilities into later years.
What are the interest rate options?
Home loans can have either a fixed rate of interest or a floating one.
In the fixed interest rate option, the interest rate is fixed at the time of taking the loan and is applicable throughout the tenure of the loan. In the floating interest rate option, the interest rate is directly linked to a benchmark rate. If the benchmark rate goes up the interest rate also goes up and vice versa.
We recommend the floating rate option because, in the current environment of reducing benchmark interest rates, a floating rate proves beneficial. But when opting for a floating rate you must ensure you will be able to pay an increased EMI.
The present home loan interest rates range from 6.95% to 14%. Most lenders also provide a slightly discounted rate of interest to female borrowers. Adding a woman co-owner also helps in getting a better interest rate
Buying a home has great emotional importance. While buying a house is a substantial financial commitment, it becomes an asset only when it appreciates in value over time. Unfortunately in times like the current scenario, you could also be stuck with properties that you might want to liquidate and we are also seeing distress sale of properties. It is recommended to take a home loan only after analyzing your income and repayment capabilities, comparing interest rates and additional benefits of multiple lenders, understanding the terms and conditions, fees involved and reading the fine print.
This entire month we will be focusing on loans. Stay tuned as we discuss loans and credit scores and address the most common doubts on taking loans.
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