- Monthly Housing Payment: Includes principal, interest, property taxes, and insurance.
- Debt-to-Income Ratio: The percentage of your gross monthly income spent on total debt payments, including car loans, student loans, and credit card balances.
- Loan Tenure: The duration you plan to keep the mortgage.
Loan affordability is calculated by dividing your total monthly payment by gross income. A lower ratio indicates better affordability and a higher likelihood of timely mortgage payments.
The Nestaway Loan Affordability Calculator is a user-friendly tool designed to help you determine how much home loan you can afford. It is particularly useful for first-time homebuyers to assess whether a potential loan aligns with their budget.
- Loan Repayment: The monthly amount required to repay the loan, including principal, interest, and associated fees. For individuals with multiple loans, this reflects the total monthly payment across all loans.
- Income: The total annual income from full-time or part-time employment, as well as additional sources like investments or pensions. This figure helps assess repayment ability relative to interest rates and monthly obligations.
- Outgoings: All essential living costs such as rent/mortgage payments, council tax, utilities, car insurance, and childcare (if applicable). Provides a clear picture of non-loan-related financial commitments.
- Total Monthly Payment: The sum of recurring monthly obligations, including mortgage principal and interest payments, as well as other debts. Excludes one-time fees like prepayment penalties.
- Discretionary Income: The leftover amount after covering housing costs and essential expenses (e.g., food, clothing, transportation, medical care). Represents the funds available for additional savings, leisure, or unexpected costs.
Benefits of knowing home loan affordability:
Better planning: Knowing how much a house will cost allows you to plan your finances accordingly and not get caught when unexpected expenses arise.
Better finance management: If you know your monthly repayments, you can ensure that you have enough money to cover these monthly payments. This will help prevent any financial emergencies from arising in the future.
Better future assessment: When buying a house, it is important to consider what might happen in five or even ten years. This allows people to consider whether they can still afford their mortgage payments if interest rates increase or their income decreases due to illness or unemployment.
Better preparedness: Knowing Home Loan Affordability helps people avoid making costly mistakes when buying property. These mistakes include overspending on a property or buying one that they cannot afford comfortably in the long run. For example, the home you are planning to buy exceeds your budget, but you avail of a loan for a higher amount anyway. This mistake can put you under a financial burden which could have been easily avoided with proper planning.
The Rate of Interest (ROI) varies based on factors such as your CIBIL score, income, age, and overall financial profile. If you meet all the eligibility criteria set by the lenders, you can qualify for the lowest rates available in the market. At present, the lowest ROI in the market is 8% per annum, but this is subject to meeting all conditions specified by the bank. It's advisable to compare offers from multiple banks and financial institutions to ensure you secure the best rate tailored to your requirements.
Loan eligibility is determined by several key factors, including:
- Cumulative Net Monthly Income: The combined net monthly income of the applicant and any co-applicants plays a significant role in determining eligibility.
- Existing Debt Obligations: The total outstanding loans and credit card dues already in your name can impact your eligibility.
- EMI-to-Income Ratio: Most banks follow a guideline where the total EMI obligations, including the proposed home loan, should not exceed 60-70% of your net take-home salary.
The final decision to grant a loan rests with the bank's credit department, and there can be several reasons for rejecting a home loan request. While income is a significant eligibility criterion, other common issues include:
| Possible Issues / Reasons for Rejection | Possible Way Out |
|---|---|
| Several ongoing loans |
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| Issues in your credit history as reflected in your CIBIL, Equifax reports |
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| Not meeting the minimum cut-off for or hidden internal credit parameters crucial to evaluating a loan request | Nestaway (in association with AurumKuberX) can re-apply for your loan in one of the other 30 plus lenders that we are affiliated with |
Pre-closure refers to a situation where the customer wants to settle the entire outstanding principal amount in one lump sum. Part prepayment, on the other hand, means the customer intends to repay only a specific portion of the due amount. Please consult our advisor for more details once your loan is processed.
Yes, home loan pre-closures are allowed without extra charges, provided the repayment mode you have chosen is a floating rate of interest and not a fixed one. For part payments, some banks may impose restrictions on the number of times you can make a part payment per year, as well as the amount you can repay in total within a year. Please connect with our financial advisors or the bank's loan advisor to clarify these factors before signing the loan document.