Factors Affecting Home Loan Occupancy

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Factors Affecting Home Loan Occupancy May 30, 2018

Real Estate

Occupancy, Leasehold properties

Age of property, Factors Affecting Home Loan Srishti Chandola

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Home loan tenure and the amount of home loan are positively interrelated. Thus, higher the tenure of home loan that you opt for higher eligibility for the home loan which is subject to minimum margin requirement relative to property value. It makes a lot of sense for the borrower to choose for a longer tenure, so as to be able to have some high eligibility for loan and flexibility to prepay it in the part or in full. By default, most of the home loans have a higher tenure of 20 years and in some of the cases even up to 30 years. The home loan tenure depends on several factors which one should certainly be aware of before approaching the loan lender.

Age and source of income of the borrower Home loans are provided on basis of the ability of the borrower to service it and, in turn, this is determined by the income. Therefore, the complete amount of loan eligibility will depend on the age as well as the retirement age. For the salaried individuals, 60 years is usually taken as retirement age and thus, maximum tenure of the home loan you would get would actually be equal to remaining service years. In case you are self-employed, the lenders would be willing to treat 65 as the retirement age for the businessmen and professionals. Therefore, self-employed borrowers may have the higher eligibility for the home loan. The person who is about to get retired is usually eligible for a home loan unless able to prove that they have a regular source of income.

Age of property Building age plays an integral part in determining the eligibility of home loan. As the house is pledged as the security for the home loan, it is the recourse that lenders have, in case of the default in home loan servicing. Therefore, the lenders won’t provide the home loan for the tenure that is longer than the residual life of property that you intend to purchase.

Factors affecting home loan occupancy

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The residual life of any property is determined by a civil engineer or an architect who will hold a physical audit of the property. Contrast to the retirement age, the age of the building is actually not standard and it varies from one building to another which depends on the material use of the construction, project location, etc. for the properties that are situated close to sea, the residual life may be much lower than the properties that are situated on plains due to the erosion that is caused by salty sea breeze.

The home loan tenure can’t be longer than the life of the property. In case, the tenure is longer than the residual property life granted, the lender needs to carry the risk of losing the security if the property is destroyed or if it collapses. This is the reason why generally the lenders don’t finance dilapidated and old properties.

Leasehold properties If the property is constructed on the leasehold land, the tenure of the home loan can’t be higher than balance period of the lease even though the property be in a good condition as lenders would definitely be unwilling to risk the possibility of the lease not being renewed. Such cases are of course rare as the property lease is granted normally for a fairly long period. This situation, however, may arise for the property if lease period of land is close to its end.

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