How to calculate own Housing Loan, Personal Loan & Car Loan Eligibility
To purchase a House is a dream of anyone’s life. However, some people are confused about how and where to start. So we have decided to make this process simple. Before approaching for the Housing Loan, the following two aspects need to be considered first :-
1. How to estimate the monthly expenses while estimating Housing Loan and
2. How to assess the Project Cost and Housing Loan Component
How to estimate the monthly expenses
For this, 60: 40 ratio needs to understand 1 st. 60: 40 ratio means from your Gross Income atleast you should retain 40% for living and 60% can be considered for investment, loan deductions and other deductions. When, you plan a house property through housing loan then the proposed housing loan EMI and your existing deductions should not be increased to 60% of your Gross Income (Income without deduction). Your existing deductions include Provident fund, Professional Tax, LIC, Tax and other existing loan EMIs (personal loan, home loan, loan for student). For salaried and business class people the same rule will be applied. For business class people, they can add their interest and depreciation in Gross Income while calculating the ratio since the said expenses are not cash expenses. Further, the gross income for business class will be the Gross Income of their Income Tax Return.
Further, for calculation of proposed Housing Loan EMI, various mobile apps are available which are user friendly which can be downloaded from Play store and apple store etc. e.g. EMI calculator, Home Loan EMI calculator etc.
Lets see the example for Salaried Class
This is a salary slip of Mr.A for the month of XXXX, 2020. Mr.A is also having a Loan against Property Facility with EMI to the tune of Rs.8000/- per month (CIBIL is also showing this EMI details). Now, he is planning to purchase a house. Hence, lets calculate his loan eligibility:-
Salary for the month of XXXX, 20
Suppose, Mr.A is having an age of 35 years, hence he can avail the Housing Loan for another 25 years (60 maximum retirement age — present age 35). Hence, at 8.50% p.a. rate of interest, 25 years tenure and EMI of Rs.30100/- p.m. (calculate as per Mobile App) as mentioned above, his loan eligibility will be Rs.37,00,000/- approx. which can be vary as per different schemes of different banks mostly go on higher side.
Now, lets see the example for Business Class while assessing Housing Loan
Mr.B is running a Kirana Shop and he files IT Returns each year through his CA. He has submitted the two years IT Returns alongwith Balance Sheet and Profit & Loss Statement to the Banker alongwith a Statement of Account for last two years, to view his business turnover to the Banker, with a request for Housing Loan Facility. He is also availing a Car Loan facility with monthly EMI of Rs.8000/-. However, he is planning to give the proposed Flat on rent and expect monthly rent of Rs.9000/-. Let’s calculate his Housing Loan eligibility.
As per IT returns, his income details are as under :- (Amt in Rs.)
Mr.B is having an age of 30 years, hence he can avail the housing loan for another 25 years. Hence, at 8.50% p.a. rate of interest, 25 years tenure and EMI of Rs.23567/- p.m. mentioned above, his loan eligibility (calculate as per Mobile App) will be Rs.29,00,000/- approx. which can be vary as per different schemes of different banks mostly go on higher side.
Most Banks take average of two years Gross Income and Net Income while doing calculation.
I share herewith the link of Mobile App (Loan EMI Calculator / Housing Loan EMI Calculator) for your ready reference :
https://play.google.com/store/apps/details?id=com.finance.loan.emicalculator.
Some Bank’s website also having such EMI Calculator some links are https://www.sbi.co.in/web/student-platform/emi-calculator?inheritRedirect=true etc.
How to assess the Project Cost for Housing Loan.
Now let’s talk about Project Cost. Project cost means the total cost, you need to bear for the proposed Flat to be purchased. If you purchase the resale Flat through broker, you need to bear Brokerage charges also alongwith other charges. However, if you are purchasing the Flat through developers, then no need to worry about brokerage charges but there are other charges also which need to bear like development charges, electricity meter, water meter, maintenance for two years etc.
Let’s see this through example. Mr. A is about to purchase the Resale Flat through Broker and Mr.B. through Developer a ready to move new Flat as under :-
Margin Money :- The Bank does not finance 100% of Agreement Value. To show your commitment towards the project, you need to bear some portion of the project called margin money. The margin money may vary from Banks to Banks as per their guidelines mostly depend on Agreement Value or Value of Flat. It ranges between 10% to 20% of Agreement Value.
It is also called Loan To Value Ratio (LTV Ratio) which defines how much loan will be available against the Agreement Value.
Stamp Duty :- The Government publishes Ready Reckoner every year for calculation of Stamp Duty of particular Flat in particular area. The brokers / developers are very well aware about this Ready Reckoner. Now a days, Ready Reckoner is easily available from Mobile App Stores and Google.
Transfer Charges : Transfer charges are those charges which the Society or Developer takes to transfer the Flat in the name of proposed purchaser in the Society Records.
Brokerage Charges : Broker helps to search and finalise the House Property and he charges for the said services which is 2% of the Agreement Value. However, these charges also negotiable.
Banker / Financial Institutions (Lender) only finance Agreement Value and do not fund other expenses. Some Banks consider Development charges as Project Cost and hence finance the said charges also. Hence, excluding Loan, the purchaser need to bear the rest project cost from his own sources.
Some Banks give Home Loan with a margin on lower side even with 5% margin and 95% loan component. Hence, in such cases, the Borrower has to manage the rest cash components on lower side.
Further, as mentioned above, some Banks even consider development charges as Project Cost and take the said charges while calculating loan component. Hence, in such cases also, the Borrower has to manage the rest cash components on lower side.
Most developers/sellers ask for Black Money against decide components. However, Black money is prohibited as per law. They desire such Black Money to make their own funds legitimate. If developers/sellers ask such money, the Borrower’s cost components increase drastically, hence he needs to manage the Black Money from its own sources. The Loan will not be allowed for such illegal demand of developers and sellers.
The 60 : 40 ratio is not only applicable for Housing Loan but for other loans also like Personal Loan, Car Loan, Loan against Property, Mortgage Loan etc.
You have to read my post “ Step by step guide for availment of Housing Finance “.
If you still having any problem in calculation and having other issues regarding above, please feel free to comment.
Originally published at https://loans-review.com on May 21, 2020.
