Home Loan is a sum of money borrowed from a financial institution or bank to purchase a house. Home loans consist of an adjustable or fixed interest rate and payment terms. One can also avail a housing loan to buy a plot of land and construct on it. Home Loans are also issued to extend/ repair/ renovate/ alter a new or second-hand property. The Home Loan is taken by a borrower against the property/security to be bought. This is done by giving the banker a conditional ownership over the property i.e. if the borrower fails to pay back the loan, the banker can retrieve the lent money by selling the property.
Home Loan Eligibility:
Home Loan eligibility depends upon various factors. A few of them are listed here-
- Income – Your income determines the amount of home loan you are eligible for. Banks generally keep the EMI to income ratio at 0.45 to 0.50.
- Tenure – The longer tenure you opt for, the more is your home loan eligibility and the lesser is your EMI.
- Age – Your age will determine your home loan tenure and hence your eligibility.
- Interest Rate offered – Banks offer Fixed and Floating Rates of Interest. If your interest rates are on a lower side, then the loan eligibility will be higher.
- CIBIL Score – Your credit report tells the bank about your repayment capacity and hence determines if you’re eligible for a loan.