Generally we take a home loan for either buying a house, flat or a plot of land for construction of a house, or renovation, extension and repairing for our existing house. But, before starting the home loan process, we need to figure out our total eligibility, which will mainly depend on our repaying capacity. Repayment capacity is mainly based on monthly disposable income, which, in turn, is based on factors such as total monthly income/excess less monthly expenses, and other factors like spouse’s income, belongings, responsibilities, stability of income, etc.
The bank has to make sure that you’re able to repay the loan on time. The higher the monthly expendable income, the higher will be the loan amount you will be granted for. Typically, a bank assumes that about 50% of your monthly surfeit income is available for repayment. The tenure and interest rate will also determine the loan amount. Further, the banks generally fix an upper age limit for home loan applicants, which could impact one’s eligibility.
Home loans also have tax benefits – According to the Income Tax Act, the principal constituent gets tax benefit under Section 80C of the total annual EMIs. Even the partial prepayment amount qualifies for the same, but within the overall limit of Rs 1.5 lakh under Section 80C. Further, if it is a self-occupied property, the interest paid is deductible up to Rs 2 lakh in a year.
While taking a home loan, choose the lender wisely –
Choosing a lender who offers the lowest EMIs, will be beneficial for you,
because you need to pay substantially less in repayments as compared to others. The lenders offering the longest tenure of, suppose,
30 years may not always be a good thing. Another option is to repay surely
within particular duration without any kind of prepayment charges. Also check the matter if the lender includes the cost
of furnishing the house within the project cost. Always try to choose lenders offering daily or monthly reducing
balance, unlike the annual reducing balance method used by several banks.