When you are about to apply for a home loan, the value of your property is one of the key factors in determining your maximum eligible loan amount. Even if you are eligible for a higher amount based on your income, the value of property will be given equal consideration. For instance, if based on your income you are eligible for 20 lakhs, and the value of your property is 10 lakhs, then the loan amount you will be eligible for is not more than 8 lakhs. The main reason being, when you avail a secured loan such as a home loan the bank needs to ensure that the borrowed amount is less than the value of the collateral. In case of inflation or for some reason you are unable to pay your loan then the lending institution will take over your collateral and this should be sufficient to cover for your loan amount.
Following are some of the aspects for which the value of your property will have an impact:
- Age of the building
The older the building, your tenure will change accordingly. For instance, your building is 35 years old, and then the tenure for which you can avail the home loan won’t be longer than 15 years. This is because banks have a cut-off age for buildings, beyond which its full value will not be considered.
- Unaccounted expenses
Sometimes, there are under-the-table transactions that happen between the developer and the buyer, always note that these are unaccounted for and will not be included in your loan amount. Nor can you use it to increase the value of your apartment when you present it as collateral.
- Value added facilities
There are cases where there is a separate agreement for value added facilities, this is usually done to reduce the value of the stamp duty on the actual sale agreement. As long as the supplementary agreement is registered under law, then there is a chance that it will be considered for an increase in loan amount.
- Ownership proof
Ensure that you have the proper documents such as title deeds and encumbrance certificates for your building/property. This is duly verified by the banks and only then will the loan application go into further processing.
Remember that, irrespective of how much you may be eligible based on your income, your property has to be able to support your application if you are looking for maximum eligibility both in Home Loan as well as Loan Against Property.
