Does a Co-Applicant's Income Improve Your Chances of Getting a Higher Home Loan Amount?
10 Feb 2021
Does a Co-Applicant's Income Improve Your Chances of Getting a Higher Home Loan Amount?
A Home Loan is considered a once-in-a-lifetime opportunity for many people. That is why it would help to maximise your potential loan amount. The best to go about is to opt for a joint Home Loan. Let's find out what is a joint Home Loan and how you can improve your chances of getting a higher Home Loan amount.
What is a Joint Home Loan, and What is a Co-Applicant in Home Loans?
A joint Home Loan is one that you can take along with another applicant or a co-applicant. A co-applicant is simply an additional applicant who is just as involved in the underwriting and approval process of the same Home Loan. When you take a loan with a co-applicant, it is deemed as a joint Home Loan.
A co-applicant may be named as the secondary applicant on the joint Home Loan but may share the same loan repayment responsibilities and benefits that go with a Home Loan. Co-applicant may or may not be joint owner of the property. However a joint owner has necessary to be a co applicant even if he / she is not having any income (e.g. In case of house wife). If joint owner is not having any income, then eligible loan amount would be calculated solely on the basis of income of main applicant.
Having a co-applicant on your Home Loan can also increase your chances of getting the loan approved. Furthermore, it also helps you procure a higher loan amount to buy the house of your dreams. However co-applicant must be your close relative.
Benefits of Having a Co-Applicant in Home Loan
Having explained what is a joint Home Loan and the definition of a co-applicant, let's take a look at a few benefits of having a co-applicant on your Home Loan.
The bank considers the income of both applicants
When you apply for a Home Loan, the bank considers various factors that can affect your eligibility. This includes your income, outgoing expenses, credit scores, and so on. While you may be eligible for the loan, you may not get a higher loan amount as the sole applicant. But when you apply for a Home Loan jointly with another applicant, the bank also considers their income. A higher income typically results in a higher loan eligibility amount, enabling you to buy a better property without compromising.
A joint Home Loan reduces your loan burden by half
Another advantage of taking on a joint Home Loan is that your loan burden is reduced considerably. You and your co-applicant can devise a strategy that distributes the loan repayment equally. This way, if either of you is faced with unpredictable circumstances leading to a loss of income, the other can ensure that EMIs are paid on time. Doing this ensures you never default on your EMI payment.
Conclusion: Now that you know what a co-applicant is in a Home Loan, you should consider applying with one. A co-applicant reduces your loan burden and shares financial responsibility.
So are you looking for a Home Loan? Apply now with Bank of Baroda
Difference Between Credit Card & Debit Card
4 Differences between Credit Card and Debit Card
When you open a bank account, you are provided with a cheque book, a passbook and an ATM-cum-debit card, also known simply as a debit card. After you’ve held your account with the bank for some time, the bank may even offer you a credit card. However, many people are often confused about the difference between debit and credit card and often assume them to be the same. So, we’ve listed the differences to help you understand. Let’s start with understanding the meaning of each card.
What is a debit card?
A debit card is a card that is linked with your savings or current bank account. When you open your bank account, the bank issues a card that you can use at ATMs and PoS terminals to withdraw money or pay for your expenses, respectively. The sums are automatically and instantly debited or deducted from your debit card. Banks provide free debit cards and charge a small annual maintenance fee.
What is a credit card?
A credit card is another type of bank card through which you can borrow money for a bank or financial institution. The issuer provides you with a line of credit, also known as a credit limit. This limit is determined based on your income and can be increased from time to time. The issuer bills you for your credit card expenses, and you need to pay them off by a stipulated date. If you fail to repay the sums borrower on credit, the issuer levies an interest rate on the money borrowed.
Credit card vs debit card
Having explained the meanings of credit and debit cards, let’s find out what is the difference between credit card and debit card. They are as under:
Bill vs account statement
People who have a credit card are sent a bill for the expenses incurred on the card each month. The issuer sends a bill explaining the minimum and total sums due. In the case of debit cards, the account holder can directly access the savings account to see the expenses incurred.
Linking the card
The debit card is linked to your savings account, whereas the credit card is linked to the financial organisation or issuing bank offering the credit facility.
Credit vs spending limit
Typically, credit card companies provide a credit limit, and you cannot borrow sums exceeding the credit limit. In the case of debit cards, banks issue daily cash withdrawal as well as PoS spending limits.
The credit card issuer levies an interest rate if one is unable to repay the amounts borrowed on time. However, in the case of debit cards, money is not borrowed on credit, so no interest is charged.
Apart from the points mentioned above, a significant aspect of difference between debit and credit card is that debit cards are provided free of charge by the bank. In contrast, credit cards may be availed through an application or by invitation only.
Home Loan Eligibility Guide for Beginners
Home Loan Eligibility Guide for Beginners
Buying a house in today's real estate market may seem expensive, but it is not impossible. With Bank of Baroda's Home Loans, you can buy a ready-to-move-in home, an under-construction home or a plot of land and construct house whithin 36 months. You can even construct a house on any piece of land you own. The bank also provides the necessary finance to renovate your existing property. However, your loan is sanctioned only if you fit the bank's Home Loan eligibility criteria. Let's understand what is Home Loan eligibility, and the various criteria considered by the bank.
What is Home Loan Eligibility?
Home Loan eligibility is nothing but an assessment of your loan repayment capacity. To assess whether you can afford and then repay the loan in a timely fashion, the bank considers several factors. These include your age, your income, your credit scores, the type of loan you are applying for, among others. Based on these factors, the bank determines the maximum loan amount you can get. Some factors also help you procure a lower interest rate on your Home Loan. Let's take a look at each of these criteria individually.
Home Loan Eligibility Based on Salary / Income
Your salary is the first criterion on which the bank assesses your Housing Loan eligibility. You should be able to provide valid proof of your income to eligible for this loan. You could be a salaried employee, a self-employed professional or a business/practice owner such as a lawyer, doctor, chartered accountant, etc. Essentially, it would help if you had a regular income to be eligible for a Bank of Baroda Home Loan. What's more, you can apply for the loan jointly with another immediate family member (check with the bank for eligible joint holders), who is also stably and securely employed, to improve your eligibility.
The bank typically has a standard interest rate and loan amount allowance based on your income bracket. The interest rate is linked to the Baroda Repo Linked Lending Rate or BRLLR and varies as per your credit score. [For instance, if your net monthly income is Rs. 25,000 and you can produce credit scores exceeding 750 points, you may be eligible for a maximum loan amount of Rs. 15 lakh at interest rates starting at 6.85% p.a*. On the other hand, if you have good credit scores and your net monthly income is Rs. 75,000, you can get a maximum loan amount exceeding Rs. 57 lakh.] You may repay the loan in tenures lasting up to 30 years.
You can use the Bank of Baroda Home Loan eligibility calculator to check the maximum loan amount you can get based on your salary.
Home Loan Eligibility Based on Age
Your age is another crucial Housing Loan eligibility factor that banks consider. Typically, the bank requires you to be at least 21 years of age to apply for the loan. Also, your age at the time of final EMI repayment should not exceed 65 years. Your chances of getting a Home Loan sanctioned are higher when you are younger; typically in your twenties or thirties. This is because, in this age group, you would have established your career securely, and you would have the capability to repay a high-value, long-tenured loan like a Home Loan. Furthermore, when you apply for a loan in your twenties or thirties, you still have several years of gainful employment ahead of you. You would be drawing a monthly income, which helps you repay your EMIs on time.
When you apply for a loan in your 40s, you may be able to make a higher down payment or pay a higher EMI amount. You need to assess what works best for you and then apply for the loan accordingly.
Other Factors determining Home Loan Eligibility
Apart from your salary and age, several other Home Loan eligibility criteria that the bank evaluates while considering your loan application. They are as under:
The Number of Years You've Been Employed
Being employed for over three years with the same employer conveys to the bank that you are stably employed.
The Details of Your Employment
Typically, the bank consults your employer to assess your claim of employment. It also asks you to provide documents such as your offer letter, monthly income statements and salary slips, etc., to determine your eligibility. These documents help the bank evaluate your employer's reputation and decide the loan amount and interest rate you can get.
Your Credit Scores and Financial Management
Your credits score is perhaps the most crucial of all Home Loan eligibility criteria. It is nothing but an assessment of your financial behaviour and your creditworthiness. Your credit score helps the bank evaluate how you spend your money and your income-to-credit ratio, i.e., how often you use your credit card and whether you repay your credit card bills on time, whether you are repaying your other existing loans regularly. It would help if you typically had a credit score of over 775 points out of a possible 900 points to get a low-interest Home Loan. The bank may also sanction your loan request if your credit score is in the 701-774range, but you may be charged a higher interest.**
The Value of the Property You Intend to Buy and the Loan-to-Value Ratio
While the bank finances a significant portion of the value of the property you want to buy, you have to provide a down payment. Typically, you have to provide at least 10% of the property's value as down payment, and the bank finances the remaining 90 per cent. This is known as the Loan-to-Value ratio. With Bank of Baroda, you can get finance of up to90% for Home Loans up to Rs. 30 lakh. You can get up to 80% finance for loans in the Rs. 30 lakh to Rs. 75 lakh range. If you need a loan exceeding Rs. 75 lakh, you have to pay a down payment of up to 25% of the property's market value and can get loans up to 75% of the value of the property.
Tips to Enhance Your Home Loan Eligibility
While you cannot change the bank's Home Loan eligibility criteria, there are several ways in which you can enhance your Housing Loan eligibility. They are as under:
Repay Any Existing Loans You May Have
Your credit scores are reduced if you have any existing loans while you apply for another. As such, it is better to repay your current loans and then apply for a fresh Home Loan. Repaying existing loans demonstrates to the bank that you had taken on and repaid loans in the past, and makes you a credit-worthy applicant.
Apply Jointly With A Co-Applicant
When you apply for a Home Loan jointly with a co-applicant, the bank considers both your incomes. It also checks the credit scores and repayment behaviour of both applicants jointly. If both of you have credit scores exceeding 701 points, your eligibility will be enhanced, and you can even get low-interest loans if credit score is further higher.
Opt For A Longer Tenure Home Loan
Your Home Loan eligibility increases with a higher loan tenure. A higher tenure allows you to repay the loan in smaller EMIs. It also ensures the bank that you would be employed for a longer duration, enabling you to pay your EMIs on time.
Calculation of Eligibility for Home Loan
Now you can calculate your Housing Loan eligibility even before you apply for the loan. You can use an online Home Loan eligibility calculator, available on the Bank of Baroda website. Enter details such as your age, income, monthly expenses, other loans EMIs, and the value of the property you intend to buy. Once you submit these details and click on enter, the calculator computes the maximum loan amount you can get. You can apply for a Home Loan online, .
So, visit the Bank of Baroda website to check if you are eligible for a Home Loan. Apply for your Home Loan online and start the process of becoming a property owner!
*Subject to change at Bank of Baroda's discretion.