“Just because you’re dependent income does not mean that you cannot buy your own house using a home loan.”
Buying a home on a single income may look extremely difficult at first, but if you understand the concept of the entire lending process and plan a systematic payment strategy, owning your home is quite possible.
Here are a few tips that will help you map a better strategy:
Build a solid credit profile
Since a home loan is required, it is imperative that you have a strong credit profile. Also, a single income means that you have only one credit profile to show. Avoid any action that could hurt your credit standing, for e.g. a big credit purchase before applying for a loan. (Anything above Rs. 75,000).For those with multiple credit cards, avoid cancelling them before applying for a loan. You will end up reducing the average age of your accounts and hurt your credit utilisation ratio – something that can hamper your chances of getting a loan.
Also, reducing the credit card limit might actually help. Here’s how:
If you have a credit limit of Rs. 1 Lac on your card, the bank may assess that as a debt of 1 Lac. This may or may not happen, but it’s better to check with your mortgage broker beforehand.
So you’ve got a solid profile now! What’s next?
Protect your income
Well it is good to have a life-jacket for you & your family before taking a leap. Your mortgage broker or bank will definitely ask you about the insurances that you have in place for yourself. Since you’re relying upon a single income, it is critical that you have an income protection plan/accidental insurance that will look after you and your family just in case you suffer an accident, sickness or unemployment. It is important to know that some insurance plans are long-term and you might have to pay premiums for a period of 10 to 15 years. However, there are many short term income protection plans available in the insurance market that you can look into right now! Just ask your mortgage broker for reliable options.
You’ve covered all bases now, let’s go ahead!
Get a Guarantor if you can!
Even though having a guarantor on your loan is optional, having one will greatly boost your chances of getting a loan.
Remember that this is a massive responsibility and it is important to make sure your guarantor is completely aware of all the risks.
Accumulating funds for a down-payment
The RBI has authorized Indian banks to lend up to 80% of the property’s purchase price. The remaining balance has to be paid as down-payment by the home-buyers. However, if you think about it, this 20% is still a lot money since price of a 2 or 3 BHK home can hover around the Rs.75 Lac mark and above.
Loan from your employer
Several employers provide loans to their employees on a low interest rate. Documentation required to avail this loan is fairly simple and the entire availing process is less complicated.
Employee’s Provident fund
Loan against financial securities
Home down-payment loans
Pick and ideal EMI plan for yourself
You’ve got the loan and the house! What more?
Keep an eye on government schemes and tax benefits
Here are a few tax benefits that you can avail
Interest paid on loan is eligible for deduction up to Rs.2 lakh under Section 24 when the property is self-occupied. The principal amount repayment of up to Rs.1,50,000 is eligible for deduction under Section 80C.
Also, recently, our Prime Minister announced that housing loans of up to Rs. 9 lakh and up to Rs. 12 lakh will receive interest subsidy of 4 per cent and 3 per cent respectively. This can be useful if you’re buying smaller and affordable homes
Now that you’ve gotten a clear picture of how you can buy a home on a single income, don’t let anyone tell you that this cannot be done, because it can. A crystal clear plan and preparation is the key to success for this one.