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adProperty News

Planning vital before availing a home loan
Source : The Hindu Published On : 2012-01-21 City : Hyderabad

Planning vital Before Availing a Home Loan

Banks and HFCs are increasingly getting strict with their customers, insisting that they obtain a “clean chit” from CIBIL (Credit Information Bureau (India) Ltd.) proving their credit history because, in their quest to own a house many people resort to all kinds of activities which can land them in trouble eventually.

Bhaktavalsalan, AGM, Can Fin Homes Ltd. Jayanagar Branch, Bangalore (a housing finance company) narrated a recent customer's case who had applied for a home loan. A prospective borrower had applied for a loan submitting relevant documents. Since his case seemed genuine he was given an ‘in-principle' sanction letter. But when his credit credentials were verified with CIBIL before the loan was to be disbursed it was observed that he had taken a loan of a few lakhs from a private bank just a week ago. The person had invested none of his own money into the house and had planned to live fully on borrowed terms. Such cases can create a huge problem for the entire lending and borrowing system of banking which eventually can lead to NPAs besides landing customers themselves in repayment problems.

It is true that we all dream to live in our own houses, but one has to prudently plan for such investments. First of all the home loan budget has to be calculated based on the investable surplus of an individual. The next step will be to decide on the affordability. The current surplus will give clarity of such affordability. Additionally one can also add the value of current assets by jotting down a few aspects such as:

Such evaluations give a lot of confidence to start planning for a house and the chances of plans going haywire reduce to a large extent. Since the home loan is a real long-term obligation of paying relentless EMIs month after month, the borrower has to consider facts such as

* Age at the time of borrowing

* Number of years that he/she thinks he/she can continue to earn to meet the repayments

* Current income levels and expected increase in the income over future years

* Family commitments including dependants, existing child/children's future, any additions to the family in terms of child/children in the future

* Other loan liabilities such as car loan, personal loan, credit card outstanding and any other commitments, all these essential information form a home-loan budget.

Additionally, interest rate volatility is something which is not in our control and under current type of economic circumstances wherein the interest rates have gone up considerably by over three per cent since July 2010, the monthly outflow will suddenly increase which can put pressure on income v/s repayment capabilities. Here too one should be wary of higher loans and EMIs.



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