There is always a sense of achievement when you buy a house. If you can do so by using your savings, nothing like it. However, with the increasing real estate prices, purchasing a house can drain your savings. At such times, a home loan can be a great help. Through a home loan, you can borrow the required funds to purchase a house and repay the loan comfortably over a long tenure.
- Requirements of Availing a Home Loan
When you take a home loan, the house you purchase remains with the lender as collateral. The property acts as security against the money you have borrowed. If you default on repayment, the lender can attach the property to get back the loan money/ lent amount/loan amount
Lenders consider your credit score, age, income, current debt situation, etc. while assessing your home loan eligibility. But, the amount of loan sanctioned depends on the value of the property. Therefore, before availing a home loan, it is important to understand how the property value is evaluated for home loan approval.
- How is the Value of Your Property Evaluated?
Lenders consider the following factors while evaluating your property:
- Condition and age of the property
Lenders carefully examine the condition and age of the property while deciding the loan amount. The property you take the loan for should be free of legal complications. The construction should not be very old or dilapidated.
- Location of the property
The lender evaluates the property to ensure that they bear no loss. Therefore, while evaluating, they consider the resale value of the property. A property located in a prime location in a town could be easier to sell than the property located in a remote area.
- Property documents
When you have all the documents in order, it generally reflects that the property is free from any dispute and unauthorized construction. Therefore, it is essential to have all the property documents in place for the bank’s perusal. Illegal construction or property caught up in court cases are not preferred by lenders. Loan application can be rejected due to an ongoing property dispute.
- How Much Value of the Property is Considered for a Home Loan?
Lenders usually do not lend the entire value of the property as a home loan. A Loan amount ranging between 75% and 90% of the property value is usually approved, based on eligibility.
There could be variation in the process of property valuation based on how new your property is. Financial experts opine that if the property is new, the lender might rely on the property documents for the valuation. However, If it’s an old property or if it has been sold earlier too, the bank might ask for a valuation certificate. Moreover, the amount of home loan you can avail also depends on the LTV ratio given by the lender. This LTV usually depends on your eligibility, credit score and your relationship with the lender.
To know more about availing a home loan, visit the home loan section on our website.