Weightage Allotted for Identified Variables
Various banks have their own methods/standards for calculating eligibility. You should do some research to check which bank is offering you the higher loan. Coupling your spouse’s income may also be a good option to increase your home loan eligibility.
Home loan eligibility depends upon various factors such as income (banks generally keep the EMI-to-income ratio at 0.45 to 0.50); tenure of the loan (the longer tenure you opt for, the more is your home loan eligibility and the lesser will be your EMI); interest rate offered (if your interest rates are on the lower side, then the loan eligibility will be higher, and vice versa); and existing loans (in case you have any existing loan, the loan eligibility amount will come down to keep the EMI-to-income ratio around 0.50).
This is not perceived to be an important or influential variable and hence has been allotted no points. Further, the borrower can only increase his eligible income by clubbing that of his spouse/close relatives.
Age is of minor relevance for the home loan as the Indian male/female becomes gainfully employed only around 30 years of age. Most of the banks/HF companies give loans to those whose age is more than 18. The maximum age is around 70 years. Therefore, taking this as a minor variable, we have assigned 5 points.
Maximum Loan Amount
Banks/FIs offer three slabs of loan structure – up to Rs 30–Rs 35 lakh, up to Rs 75 lakh, and above Rs75 lakh – depending upon one’s eligibility in terms of income and the rate of interest offered to the prospective borrower. As this is an influential factor, we have allotted 15 points for this variable.
Margin (Borrower’s Stake)
This is one variable that often confuses the consumers. Margin is the amount or contribution that is brought in by the prospective borrower as proof of his stake in the business transaction. It is nothing but his involvement in the investment/loan process. Margin money is also sought by the business/ government machinery to keep it as a hedge fund against any non-performance of any of the clauses in a contract/tender work. In view of its importance, we have assigned 15 points.
This is prevalent with almost all the financial institutions. It is a one-time charge levied by the financier towards the labour of processing the loan documents, as a cost to be borne by the prospective borrower even if in the final stages of the loan process the loan is not sanctioned by the financier. It also includes documentation charges, stamp duty, etc.