To have a fundamental idea of how costly a property you can purchase using a Home Loan in Kolkata or a home loan in Lucknow or any other city, ensure to consider computing your affordability through the reverse calculator. One of the aims that most of your list may include is purchasing a home. Once you reach an age wherein you can purchase a home of your own you even look at how to manage and arrange your finances. Before moving ahead with the financial institution or bank to avail a loan to buy a home, you must ensure to check out your eligibility to know how much home loan proceeds you can take up. To do this, you can use the reverse calculation. To perform such calculations, there are reverse calculators that are available in the market. Note that, zero personal data and information are required for using such calculators.
What’s meant by a reverse calculator for knowing your home loan eligibility?
For a usual home, the purchasing procedure is often viewed as when buyers initially shortlist a property and later visit the financial institution for a home loan on the selected property. A lot of times, it happens that the property is well within the budget of a buyer; however, the required loan proceeds may not be granted by the bank. In such scenarios, the buyer must let go of that specific home and look out for options, i.e., either a small home in the same region or a likewise sized home in a comparatively less costly region, locality, or area.
Home loans get granted by lenders after a thorough analysis of the repayment capacity of the applicant/borrower as well as a few financial and technical aspects of the property, which is being bought. However, even before reaching out to a financial institution for a home loan, it is necessary for you to conduct a basic check on how much the loan you can easily afford and depending on this info you may choose the property that best fits your budget.
Financial institutions generally have home loans, where they provide principal sanction letters, which is solely dependent on your income as a borrower, which serves this purpose. However, it involves payment of a few fees and charges every time you place an application for such home loan processing/sanction letter.
So, to have a fundamental understanding of how costly a property or land you can purchase, you must consider computing your affordability through an online reverse calculator.
Reverse calculator – all you must be aware of –
Before you make use of the reverse calculator, ensure to be ready with the listed information –
EMI amount (in case you are paying any)
Loan repayment tenure
Price of your home
Instances of reverse calculator for understanding your home loan eligibility –
Ensure to understand the concept of reverse calculation by going through the listed example –
Ms X, a 28-year-old salaried IT expert earning a monthly in-hand income of Rs 75,000 and residing in a rented flat in a high-class prominent suburb got married and wants to purchase a home with her family. The official retirement age is 58 years meaning she has 30 years for repaying the home loan. Also, the age of 30 years infers a maximum repayment tenure that any bank can provide for a home loan.
Of the income of Rs 75,000, she holds the listed monthly liabilities –
Home rent – Rs 25,000
Personal loan EMI – Rs 5,000
Car loan EMI – Rs 15,000
LIC, recurring deposit, investments, etc. equaling Rs 10,000
She holds a corpus equaling Rs 10 lakh via her savings and assistance from her family, which she majorly intends to use for purchasing her own house. Here, the overall income available for the loan EMI consideration equals Rs 55,000 (post-deducting the EMIs for a personal loan and auto loan). Financial institutions deduct just the payable EMIs for loan repayments, not the payments towards investments or saving schemes.
Financial institutions basically permit 50-65 per cent of in-hand income for home loan EMI payments, which might differ from one lender to another. So, the highest amount available for loan EMI repayment equals Rs 35.750 (65 per cent of Rs 55,000). In such a case, let’s factor in the private financial institutions permitting 60 per cent of salary for EMI payment. This amounts to basically Rs 33,000 i.e., 60 per cent of Rs 55,000. Thus, depending on the available amount, compute the maximum loan amount which you may get. It is extremely simple, and you can compute the same using an EMI calculator.
In such a case, depending on the payment of the EMI i.e., Rs 33,000, a maximum home loan equaling Rs 39.5 lakh may be availed for 20 years, an amount of Rs 42.7 lakh may be availed for 25 years and 45 lakh amounts may be availed for 30 years (factoring in 8 per cent as interest rate).
Now, with the maximum loan proceeds equaling Rs 45 lakh and a corpus of Rs 10 lakh, the maximum home budget must be nearly Rs 55 lakh (involving the additional government fees). You must note that financial institutions finance just up to 80-90 per cent of the value of the property as loan proceeds if the required amount is less than Rs 30 lakh, 80 per cent for loans falling between Rs 30 lakh and Rs 75 lakh and 75 per cent for loan proceeds higher than Rs 75 lakh.
So, in this case, if Rs 45 lakh loan proceeds are eligible i.e., it must be a maximum of 80 per cent of the value of the property. In simple terms, note that Rs 45 lakh is 80 per cent of Rs 56.25 lakh. Thus, to get an overall benefit of maximum loan eligibility, the property must cost a minimum of Rs 56 lakh. However, the down payment (the rest of 20 per cent that must be paid) and government fees equaling Rs 4 lakh (considering 7 per cent of Rs 56 lakh) usually amount to nearly Rs 15 lakh. Note that it is higher than Rs 10 lakh corpus, which is available.
In other words, this corpus of Rs 10 lakh must be treated as 27 per cent of property value. It means that besides the loan availed, you must have nearly 27 per cent of property value i.e., the agreement value with you that you must pay upfront. It involves a 20 per cent down payment and nearly 7 per cent government fees like registration and stamp duty.
Here, Rs 10 lakh infers 27 per cent of Rs 37 lakh.
Thus, according to the above computation, even while Ms X is eligible for the maximum loan equaling Rs 45 lakh, according to the bank’s guidelines, she can purchase a property that has a value of just up to Rs 37 lakh (this must exclude government fees).