Go For A Longer Loan Tenure
your EMI depends on the tenure of the loan, so if you increase the loan tenure, you might get a higher loan eligibility.
So if you were planning to take a loan for 10 yrs, and assume that your loan eligibility came to Rs 20 lacs, if might happen that it goes up to 30 lacs if you are ready to take a 20 yrs loan. Its as simple as that. This is because you are committing to pay over a higher time frame.
How To Use Emi Calculator
With colourful charts and instant results, our EMI Calculator is easy to use, intuitive to understand and is quick to perform. You can calculate EMI for home loan, car loan, personal loan, education loan or any other fully amortizing loan using this calculator.
Enter the following information in the EMI Calculator:
- Principal loan amount you wish to avail
- Loan term
- Rate of interest
- EMI in advance OR EMI in arrears
Use the slider to adjust the values in the EMI calculator form. If you need to enter more precise values, you can type the values directly in the relevant boxes provided above. As soon as the values are changed using the slider , EMI calculator will re-calculate your monthly payment amount.
A pie chart depicting the break-up of total payment is also displayed. It displays the percentage of total interest versus principal amount in the sum total of all payments made against the loan. The payment schedule table showing payments made every month / year for the entire loan duration is displayed along with a chart showing interest and principal components paid each year. A portion of each payment is for the interest while the remaining amount is applied towards the principal balance. During initial loan period, a large portion of each payment is devoted to interest. With passage of time, larger portions pay down the principal. The payment schedule also shows the intermediate outstanding balance for each year which will be carried over to the next year.
Put 20% Down To Avoid Pmi
Mortgage insurance is required for all mortgage loans with a loan-to-value ratio above 80%. Unless you have 20% down, you will be required to pay PMI. PMI rates can be as high as 1% of the loan amount, in some cases, costing you thousands of dollars per year.
Save up a 20% down payment so that youre not required to pay PMI, and you will be approved for tens of thousands of dollars more than if you had to pay PMI.
Not only will a 20% down payment help you avoid costly mortgage insurance, but you will be financing a lower percentage of the purchase price, allowing you to afford a more expensive home.
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Raise Your Credit Score To Get A Lower Rate
The interest rate you receive on a loan is tied to your credit score. By raising your credit rating, youre able to get a lower mortgage rate, meaning youll be approved for a higher loan amount.
Getting just a half a percent lower rate on your loan could allow you to borrow thousands of dollars more.
One of the most common ways borrowers can increase their credit rating in a hurry is by paying down their credit card balances. If you are carrying high credit card debt, your credit score is taking a big hit because your accounts for 30% of your overall score.
Tips to Improve Your Credit Score before Applying
Getting A Second Mortgage
A second mortgage is a second loan that you take on your home. You can borrow up to 80% of the appraised value of your home, minus the balance on your first mortgage.
The loan is secured against your home equity. While you pay off your second mortgage, you also need continue to pay off your first mortgage.
If you cant make your payments and your loan goes into default, you may lose your home. If thats the case, your home will be sold to pay off both your first and second mortgages. Your first mortgage lender would be paid first.
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How To Lower Your Monthly Mortgage Payment
We all have good intentions when we set out to buy a home and budget for it. We imagine getting paid the amount weve come to expect and we anticipate paying bills on time until life happens and things change. Careers change, things break down over time and pretty soon our monthly budget is a distant memory of good intentions. Maybe youre looking to take control of your finances and you want to tighten up your budget and save some cash.
Whatever the reasoning, saving money on your monthly mortgage expenses is possible. Weve pulled together a few strategies you can try to do just that.
Condition Of Contingency Savings
Its important to maintain an adequate contingency fund level to avoid missing out on the EMIs during a financial emergency. Your current financial condition may be sound, but you may not be able to service the loan on time under a financial crisis like a job loss. In such a situation, a contingency fund could come in handy. So, before applying for a home loan, you must strengthen your contingency savings to cover the increase in your financial obligation.
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Interest Rates And Fees If You Borrow On Amounts You Prepaid
You pay either a blended interest rate or the same interest rate as your mortgage on the amount you borrow. A blended interest rate combines your current interest and the rate currently available for a new term.
Fees vary between lenders. Make sure to ask your lender what fees you have to pay.
You may not have to make any changes to your mortgage term.
B Self Employed Customers
Suitable for self-employed customers who earn higher income in some months of the year, given the seasonality of the business they are in.
- Mr. Ajay Sharma, aged 44 years, is a synthetic garment trader in Surat and aspires to buy a 3 BHK house worth Rs. 74 lakh. Mr. Sharma earns Rs. 80,000 on an average per month with his seasonal business. He stays with his family of two growing sons and a wife.
- He has accumulated Rs. 17 lakh for his own contribution. When he applies for a home loan, the bank sanctions a loan of only Rs. 47.5 lakh with an EMI of Rs. 52,000 and seasonality of his business is considered. He faces a gap of Rs. 9.5 lakh to buy his dream house!
With Extraa Home Loans
- Gets a loan of Rs. 57 lakh approved at a guarantee fee of Rs. 1.2 lakh. He is able to increase his eligibility by 20%
- He is ecstatic and satisfied that his dream is finally coming to life.
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Tips To Reduce Your Interest Burden While Repaying Home Loan
Choose a shorter loan tenure. As mentioned earlier, a shorter loan tenure ensures the complete loan repayment faster resulting in lower interest cost. You must understand that higher interest payout does not necessarily imply a higher effective interest rate. What increases with the increase in loan tenure is only the absolute interest payout increases with the increase in loan tenor.
With a smaller loan tenure, the principal amount is repaid much faster. As interest is calculated on outstanding principal amount, quick repayment of the principal amount leads to lower absolute interest payout.
Pay Off Your Existing Debts
In addition to your income, your mortgage provider will look at your income-to-debt ratios to determine how large a mortgage they will approve you for. For many people, this can be the limiting factor in mortgage affordability, even more so than their down payment.
To improve your debt-to-income ratio and get pre-approved for a larger mortgage, youll want to pay off any existing debts that you have. This includes credit card debts, other mortgages, auto or boat loans, student loans, as well as any other lines of credit that require regular repayments.
Avoid Large Purchases In The Months Leading Up To Your Application
In addition to your credit score, mortgage lenders will look at your debt-to-income ratio to determine whether youre eligible for a home loan. This ratio measures the amount of outstanding debt you have relative to your income, and the lower it is, the better. Financing major purchases, on the other hand, will increase your debt-to-income ratio, so hold off on them until after your mortgage is in place.
Clear Your Debt Obligation
The debt-to-income ratio is critical for the lending institutions to evaluate the home loan eligibility of a home loan applicant. Therefore, for an applicant, it makes sense to clear all loan obligations which will positively impact her/his home loan eligibility. She/he should boost credit score by repaying pending debts.
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Opt For Longer Repayment Tenure
Opting for a longer loan tenure will reduce your EMI, which in turn will increase your loan eligibility due to higher EMI affordability. However, opting for unnecessarily longer tenure can increase the overall interest cost of your home loan. Hence, those planning to avail home loans should use online home loan EMI calculators to find out their optimum loan repayment tenure on the basis of their repayment capacity and contributions to crucial financial goals. Borrowers can later on make prepayments to reduce their interest cost whenever they have surplus funds in the future.
Also, home loan lenders usually tend to prefer lending to those having total EMI obligations, including the EMI for the new home loan, within 50-60% of their monthly income. Hence, home loan applicants exceeding this limit can boost their loan approval chances by reducing their monthly EMI obligations through a longer loan tenure.
Extend Home Loan Tenure
Your home loan eligibility criteria are determined by your repayment ability of loan amount every month which is what we called as equated monthly installments .
If you go with longer loan tenure, you would have to pay lower EMIs every month.
But longer loan tenure means you would have to pay higher interest to the lender.
Dont worry, there is a solution to this. Prepayment
Also, assuming your income would increase every year. You can increase the EMI amount every year with an increase in your income. You just need to restrict your expenditure to some extent and you would pay off the home loan amount in a lesser time period.
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Include A Joint Home Loan For Higher Eligibility
Low income, low credit score are major factors for the rejection of home loan applications. You can increase your home loan eligibility by choosing a joint home loan instead of applying as an individual applicant.
A joint home loan means you need to consider a co-applicant who is your immediate family member .
If your co-applicant is a woman then even better, as woman co-applicant enjoys a lower rate.
How Borrowing On Home Equity Works
You may be able to borrow money secured against your home equity. Typically, interest rates on loans secured against home equity can be much lower than other types of loans.
Not all financial institutions offer home equity financing options. Ask your financial institution which financing options they offer.
You must go through an approval process before you can borrow against your home equity. If youre approved, your lender may deposit the full amount you borrow in your bank account at once.
You can borrow up to 80% of the appraised value of your home.
From that amount, you must deduct the following:
- the balance on your mortgage
- your total HELOC amount, if you have one
- any other loans secured against your home
Your lender may agree to refinance your home with the following options:
- a second mortgage
- a loan or line of credit secured with your home
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Affordability Of Home Loan Emis
Regardless of the current low rates, the question you need to ask yourself is whether you can afford the EMIs. If you feel you wont be able to repay the EMIs, you should reduce the home loan amount, increase the loan tenure or pay greater margin money. Missing EMI payments can lead to additional interest charges and an accumulation of debt apart from ruining your credit score. If youre unable to repay the EMIs, the lender can liquidate your property to recover the dues.
Raise Your Credit Score
A higher credit score helps you obtain not only a lower interest rate but also a slightly larger loan, in many cases.
Having a higher credit score may allow you to qualify for a higher mortgage , but only to a certain extent, says Matt Hackett, operations manager at Equity Now, a New York-based mortgage lender.
To boost your score, be sure to make all your payments on time, and dont max out the credit you have or apply for more credit while youre trying to get the mortgage.
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How Can You Increase Your Home Loan Eligibility
We hope this short bite on eligibility has helped you understand the basics of eligibility. Please make the best use of housing loan eligibility calculator below and be on your way to finding your dream house
Have Compensating Factors To Increase Your Max Dti Ratio
Your debt-to-income ratio is what determines how much you qualify to borrow. Your DTI ratio is the amount of your monthly debt obligations such as credit cards, student loans, mortgage compared to your monthly gross pre-tax income. Typically, lenders have a maximum DTI ratio of 43%.
If you have strong compensating factors lenders may be able to accept up to a 50% debt-to-income ratio.
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How To Improve Home Loan Eligibility
You can improve your home loan eligibility by:
- Applying with a co-applicant : If your home loan eligibility is low, you can improve your eligibility by adding an earning spouse or your parents as a co-applicant. Taking a joint loan with the co-applicant increases your income and eligibility to borrow more money.
- Clearing your existing debts : Lenders assess your debt to income ratio to estimate your repayment capacity. You must thus pay your credit card dues or any other pending debts and then apply for a new home loan for a higher loan amount.
- Increasing loan tenure : Applying for a housing loan for a maximum tenure of upto 30 years will enhance your eligibility as the EMIs go down. In this case, however, you will end up paying more interest by the end of the tenure. In contrast, if you take a ten-year tenure loan, you might be eligible for a lower loan amount, but you will save more on interest.
- Complete market research : Doing thorough market research may also help you get a higher home loan amount at low rates. The home loan interest rates keep fluctuating, and you must know the changes in the home loan rate of various banks in response to the repo rate
- Mention other income source : You must not forget to mention other sources of income, such as rent, as it would increase your eligibility for a high loan amount.
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How To Get Pre
House hunting is a funny thing you can go in thinking you know exactly what kind of place you want, but then a home unexpectedly blows you out of the water! Thats a wonderful experience, but it can be a challenge to your budget.
If youve decided you want to increase your mortgage amount, then it might take a bit of work. Getting a bigger mortgage isnt as easy as some first-time homebuyers might think. Especially post-covid, mortgage providers are being more cautious about lending large amounts of money.
That said, if youre trying to buy a home thats more than your maximum budget, or the amount youve been pre-approved for, there are still a few ways you can try to get a larger mortgage. Below are some of the steps youll want to consider taking.
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Boost Your Credit Score
The higher your credit score, the more trustworthy a borrower youll seem to be in the eyes of lenders — and thats a good thing when youre asking for what could be a sizable home loan. You can boost your credit score in a number of ways: First, be on time with all of your bill payments in the months leading up to your application. Your payment history is the most important factor that goes into calculating your credit score, so you cant afford to be late.
Next, pay off a chunk of existing debt. Doing so will lower your credit utilization ratio, which measures the amount of available credit youre using at once. The lower that number, the more it helps your credit score.
Finally, avoid opening new credit cards in the weeks prior to applying for your mortgage. Each time you apply for a new type of financing, it results in a hard inquiry on your credit record, which can knock down your score.