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Lessons: How to Increase Your Loan Amount.

 

This type of home loan offers the flexibility of an increased loan amount eligibility keeping in mind the future, career growth, prospects of the home loan borrower. You can either opt for an increasing EMI component with time or a higher EMI payment initially, which reduces in later years. It can be structured according to your wish in accordance with your repayment capacity at any given point in time.

You have chanced upon this really wonderful dream home and wish to make it yours. You rue the fact that your current gross pay would not be enough to help you obtain the loan amount required to purchase this grand home. However, you are well aware it is well within your means, as you are expecting a grand hike soon and you are in a profession, where your income can escalate at a rapid pace.

Speculating on your earning graph

You know for a fact that your peers who started a year earlier than you are now earning an income that is thrice your current income. This is not your personal opinion of your job profile but is something that experts have rated as the earning potential of your industry. In such a scenario there is scope for you to purchase that elusive dream home. Banks offer what is known as a step up home loan to fulfill such a need.

Flexibility in eligibility

This type of home loan offers the flexibility of an increased loan amount eligibility keeping in mind the future, career growth, prospects of the home loan borrower. You can either opt for an increasing EMI component with time or a higher EMI payment initially, which reduces in later years.

Easy structuring

It can be structured according to your wish in accordance with your repayment capacity at any given point in time. Generally the tenures are in different time frames. Ideally they would be 1-2 yrs, 3-10 yrs, 8-20yrs etc., with a different repayment structure for each time period.

Suited for people in promising professions

This is ideally suited for young people like you, who are in promising careers, with good income prospects in the future. Only professionals and salaried people are eligible for this type of loan.

Don’t throw caution to the winds

Though the idea of a step up loan may seem like the answer to your prayers and help you happily opt for the house of your dreams, do take care not to go overboard. Do not throw caution to the winds and make a reckless estimate of your career graph.

The recession is a fine example of encountering the unexpected. The IT industry which is considered one of the most lucrative fields is now facing a crisis of sorts. Keep in mind that anything can happen to the best of the companies in the best of the times. Be warned and account for such unexpected turbulence. At any given point in time it is advisable that your EMI is around 40% of your monthly income.

Even when you map your experience graph to your income graph, downplay it well, so as to escape rude shocks at a later point in time. Also, if you can well manage the EMI later within your income you have the opportunity to prepay and close your debt faster, which is comparatively better any day.

 

Source: Bank Bazaar

By vayaM CS