How Helpful Is A Higher Loan Amount For You?

Looking for a dream home is always an exciting experience, but the second step in the process – scouting for a new home loan – isn't always so. Even when you have found a house that you want, there is still a dilemma over whether or not you will get enough bank funding to acquire it.

What if the steps were to be reversed? What if you had an assured home loan even before you approached the developer to negotiate or to start looking for your dream home? Would it not be even better if you had more assured loan amount than what you initially had in your mind?

Larger pre-approved home loans can be a good option for many people who are looking to purchase properties.  MakaanIQ lists the benefits and disadvantages of getting a higher loan amount sanctioned.

The pros

• Many a time, people invest a lot of time and effort in shortlisting their dream homes only to find out later that they can't afford the expensive purchase, as their home loan eligibility does not match the total bill. The biggest advantage of getting a higher amount sanctioned is that it helps you have a budget within which you plan the purchase. It gives a clear idea of how much of the total cost of a house can be lent by the bank and how much you need to have yourself.

• A higher amount also saves the extra hassle of enhancing the loan amount at a later stage of construction, if there are some unforeseen expenses. In case of under-construction properties, if the construction gets delayed, one would have the cushion of those extra sanctioned amount. 

• Even if you do not avail of the full sanction amount and borrow only the required sum, you have the room for a top-up loan at a later time, if need be. 

• Higher loan amount can also be used as a good bargaining tool, for better deals and discounts, from other lenders.

The cons

• Do not be surprised when you receive a loan amount that is lower than what was actually sanctioned. That is not uncommon in case of under-construction properties. 

• In case of transfer of home loans, the lender will not disburse more than the outstanding amount of the loan on the day of transfer, even if the amount sanctioned was more, unless you opt for the top-up loan. 

• You might have a difficulty in estimating the equated monthly instalment (EMI) amount, as that would be based on the loan amount sanctioned, and not the amount which will be disbursed. The calculation becomes more complex in case of the pre-EMI option.

Quick tips to get a higher amount sanctioned

In case the property you want to buy is costlier than your loan eligibility allows:

• Club the income of your employed partner in the loan eligibility calculation.

• Get additional incomes, such as the amount earned as rent, included in the loan eligibility calculation.

• Pay off other loan accounts when applying for a fresh home loan.