Getting the most out of your home loan

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: Last week, FE Investor touched on the basics of housing finance and what was available in the market to consumers. One of the key points we found all banks highlighting is the amount of loan they are willing to give to a customer. This amount seemed to vary from 85-90% as per most banks on the overall cost of purchase, including stamp duty, registration, etc. While this sounded like a fabulous deal allowing so many people to finally go ahead and buy their dream homes, the reality is a little different. This is as the main word that all these banks use when highlighting the extent of loan they can sanction is “maximum”.

Therefore, in reality, the maximum one can get is 85% of the loan amount. However, very few people seem to get the maximum as there are multiple factors that go into determining the loan amount. Understanding these factors better and making the most of them should help prospective home loan takers improve their chances of being in the category, which gets the elusive 85% of the overall value.

Rishi Mehra, product manager and co-founder, deal4loans.com told FE, “The amount of money one can get from the bank depends on the income of the customer and the value of property. So, say he is earning one lakh a month, the maximum he can pay is 40% of his salary as EMI and hence his overall loan amount maybe only between 60-70% of the property value. Now that the markets have eased however, achieving up to an 80% of the loan amount is no longer a major issue. However, certain specific properties, this is certain localities and certain builders only, will get such loan amounts sanctioned. Apart from the top 5-7 construction companies, which will be in the category A for all bankers and in their pre-approved list, the next 100 builders will be split between category A and B for some banks and this may not be the case in other banks. Banks however do not wish to disclose this information publicly due to the highly competitive nature of their industry, and hence only the loan applicant will know if that area where he/she wishes to purchase property is okay or not. Also, this list keeps changing, as certain areas that were considered risky earlier may not be any more.”