Our research is mostly focused on locating the appropriate property and the ideal lender while we are working towards the dream of realising the aim of purchasing a large house involving up to 5 Crore Home Loan EMI, right? Despite the fact that these two decisions are extremely important, many would-be homeowners neglect the pre-loan process, which involves making sure that one is able to responsibly repay a mortgage loan. We will outline the four steps below for you to decide whether you are financially equipped for it:
Checkpoint 1: Gathering the funds required for the down payment
Homebuyers often need to fund a minimum of merely 10 to 25 percent of the property’s cost in order to consummate the sale. Thus lenders typically lend up to 75 to 90 percent of the value of the property. This is important for the majority of borrowers who need a 1 Crore Home Loan EMI or 5 Crore Home Loan EMI loans.
Instead of paying the bare minimum for the down payment, try to make a larger contribution out of your own money (between 30 and 40 percent) by building a corpus. You will find it simpler going forward to make bigger purchases as a result. The reasoning for this is that if you contribute more to the down payment and other costs, the total amount you will need to borrow, repay, and pay interest on your mortgage will be less.
Before applying for a 5 Crore Home Loan EMI loan, be sure you have a sizeable down payment saved up since this will lower the number of your monthly payments. In order to ensure that you will only need a smaller loan amount and lower EMIs when the loan is taken out for a longer period of time, you should be able to stretch your resources a bit farther and dig deeper into your pockets during this pre-loan phase. A great way to start building such a corpus is to start investing in mutual funds using the SIP method for about 4-5 years before applying for a home loan. How big of a difference this method will make will depend on how much money you can put toward this objective each month.
Checkpoint 2: Review your credit report again
Lenders will assess your credibility based on a number of factors, the most crucial of which is your credit score, before determining whether or not to issue you a loan for 1 Crore Home Loan EMI. Because of this, it is essential that you check your credit score and credit report before filing a mortgage application. If you don’t, it’s conceivable that any issues with your credit report could go unnoticed, which would be bad for both your credit score and your chances of getting a loan authorised.
Because internet financial markets provide this service for free and also offer monthly updates, you should get habituated to checking your credit score and report on a frequent basis. Additionally, looking up your credit score and report before applying can give you a clear picture of your reliability and the possibility of getting approved for a loan. This is assuming that the borrower who wants a 5 Crore Home Loan EMI does not, for some other reason—for example, by failing to meet the minimum income requirements, reaching a particular age, or failing to provide the necessary documentation—fail to get approved for the loan.
Checkpoint 3 calls for examining the current debt-to-income ratio.
Another important factor that determines a borrower’s loan eligibility is the ratio of their debt (EMI) to their income. It is the percentage of your income that is now going toward paying off debts, such as credit card bills and 1 Crore Home Loan EMI. A higher ratio shows that a larger proportion of the borrower’s monthly pay/income is going toward debt repayment. It is a gauge of the borrower’s ability to repay their numerous loans.
The bulk of lenders, whether they are banks or HFCs, that offer home loan EMIs may be reluctant to lend to clients with debt-to-income ratios higher than 60%. (including the 1 Crore Home Loan EMI or 5 Crore Home Loan EMI for the new loan). A higher EMI to income ratio shows that a person’s income and responsibilities are out of balance, which increases the likelihood that they would default on future repayments, especially in the event of an unforeseen bill or another financial catastrophe.
Your current debt to income ratio should be determined before you can be approved for a house loan. You need to consider paying off some of these loans if the computed ratio is higher than 60%. You may, for instance, prepay the debt with the highest interest rate or foreclose on one. This is so that the loan or credit card with the highest interest rate would also be the most expensive. Lowering your DTI ratio would assist in increasing the likelihood that your loan application will be accepted. The lender may decide not to grant you the loan, or they may opt to charge you a relatively higher interest rate if your debt to income ratio is high. In any case, there is a good chance that it will occur.
Checkpoint 4: Prepare for a long-term commitment.
Even if you have the resources to make a bigger monthly payment for your 1 Crore Home Loan EMI, you should think about getting a loan with a longer term—say, 20 to 30 years—so that you can manage the EMIs comfortably and yet pay off the debt. You should start investing about 15 to 20 per cent of the amount of your monthly 5 Crore Home Loan EMI into a systematic investment plan (SIP) for a mutual fund as soon as you make your first EMI payment. In less time, possibly 10 to 15 years, it would be possible to accumulate a corpus that might be used for mortgage prepayment or foreclosure.