Know Home Loan Eligibility Using Reverse Calculator
Consider utilising a reverse calculator to determine your affordability so you can get a general idea of how pricey a home you can afford.
Purchasing a home is one objective that is on everyone’s agenda. When a person is old enough to purchase a home on their own, they also consider how to organise their money. You should first determine your eligibility and the maximum home loan amount you are eligible for before visiting a bank. You can try reverse computation with a reverse calculator to achieve this. A reverse calculator does not require any private information to be entered.
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What Is the Home Loan Reverse Calculator?
In the typical house-buying procedure, purchasers frequently select a property, then go to the bank to apply for a home loan on that property. The property is frequently well within the buyer’s price range, but the bank frequently refuses to give the requested loan amount. In these situations, the buyer must let go of that particular property and search for alternatives, such as a smaller home in the same neighbourhood or a home of a comparable size in a more affordable neighbourhood.
Lenders only approve home loans after carefully examining the borrower’s (applicant’s) ability to repay the loan as well as some technical and financial factors of the property being purchased.
To determine how much of a loan you can reasonably accept before applying for a house loan, it is vital to first perform a basic self-check. Then, using this information, you may choose a property that falls within your spending limit.
Banks sometimes offer pre-approved mortgages that accomplish this exact goal by issuing In-Principle sanction letters based simply on the borrower’s income. However, each time you apply for a house loan sanction or approval letter, you must pay a fee.
So, in order to have a basic understanding of how expensive a property you can buy, consider calculating your affordability using a reverse calculator.
Reverse Calculator: Things to Know
Before you use a reverse calculator you be ready with the following information:-
- EMI amount (if you are paying any)
- Price of house
Reverse Calculation Example for Home Loan Eligibility
Learn about reverse calculation by using the example below:
- Sharma is a 28-year-old IT specialist who lives in a leased flat in a well-known New Delhi area and has a monthly income of Rs. 75,000 in cash.
- She recently got married and wants to buy a house for her family.
- She has 30 years to repay the home loan because the official retirement age is 58. Additionally, a bank’s maximum loan term for a home is 30 years.
- She has the following monthly obligations out of her Rs 75,000:
- 25,000 in house rent
- EMI of Rs. 15,000 on a car loan
- Personal Loan EMI of Rs.
- Recurring Deposit of Rs 10,000, LIC, investments, etc.
- She has accumulated a corpus of Rs 10 Lacs via savings and family support, which she plans to utilise to purchase her own home.
Here, Rs. 55,000 of the entire pay is accessible for EMI consideration (After deducting EMIs for Car Loan and Personal Loan). Banks only deduct the EMIs due for loan repayments; they do not deduct payments for any investment or savings plans.
Banks may differ from bank to bank, but generally speaking, they permit 50-65% of the in-hand earnings for home loan EMI payments. Therefore, the highest EMI payment amount is Rs 35,750 (65% of Rs 55,000). In this instance, let’s assume that a private bank permits EMI payments of 60% of salary, or Rs 33,000 (60% of Rs 55,000).
Make a maximum loan calculation depending on the amount that is available. The EMI Calculator may be used to determine this because it is so straightforward.
In this instance, a maximum house loan of about Rs 39.5 Lacs can be obtained for 20 years; Rs 42.7 Lacs for 25 years; and Rs 45 Lacs for 30 years, based on an EMI payment of Rs 33,000. (With an interest rate of 8.0%)
The maximum budget for a property should now be about Rs 55 Lacs with a maximum loan amount of Rs 45 Lacs and Rs 10 Lacs corpus (including all additional government charges)
It should be noted that banks would only finance 80–90% of the value of the property for loans under Rs. 30 lacs, 80% for loans between Rs. 30 lacs and Rs. 75 lacs, and 75% for loans beyond Rs. 75 lacs.
Therefore, in this instance, Rs. 45 Lacs is the most sum that is admissible and should not exceed 80% of the value of the property.
In plain English, Rs. 45 Lacs is equivalent to Rs. Therefore, the property must cost at least Rs. 56 Lacs in order to fully benefit from the maximum loan eligibility. The down payment (the remaining 20% must be paid) and government fees of Rs 4 Lacs (taking 7% of Rs 56 Lacs into account) come to about Rs 15 Lacs. This is more than the available Rs. 10 Lacs corpus.
Alternatively, this Rs 10 Lac corpus should be regarded as 27% of the cost of the property.
This implies that in addition to the financing you have access to, you should be prepared to pay a down payment of at least 27% of the property’s cost (or agreement value). This consists of a 20% deposit and around 7% in government fees including Stamp Duty and Registration.
In this case, Rs. 10 Lacs represents 27% of Rs.
Therefore, based on the figures above, Ms. Sharma may only purchase a house worth up to Rs 37 Lacs, even if she is qualified for a loan up to a maximum of Rs 45 Lacs, per bank policies (excluding Government Charges).
How to Use a Reverse Calculator to Determine Eligibility for a Home Loan
The following steps will show you how to utilise a reverse calculator:
- Step 1: Select a reverse calculator from the internet.
- Enter information such as the kind of property, the approximate worth of the house, the pin code, any outstanding EMIs, and the age of the youngest co-borrower.
- After adding all the information, you will receive the mortgage amount.
Develop the habit of saving: Even if the bank can only provide a certain amount of financing, more savings can help you purchase an expensive home. Because Ms. Sharma only had a corpus of Rs. 10 Lacs, she was only able to purchase a home worth up to Rs. 37 Lacs. She would have been able to purchase a more expensive property had this corpus been larger.
Taking out a home loan before the age of 28 or 30 provides for a higher repayment period of up to 30 years, which in turn boosts the borrower’s eligibility for a home loan. In India, the average retirement age for most paid workers is 58 years (60 years for central government employees).
Summing Up: Reverse Calculator
You should always confirm your eligibility for a home loan before proceeding. The reverse calculation method is among the simplest techniques to determine your eligibility. A reverse calculator can be use to perform the computation.
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