- How many times can one apply for a home loan?
- What factors dictate the approval of more than one home loan - Read this post to know all these
While some want to buy just one home in their lifetime, others have the ambition of buying more than one home. To ensure any of these happen successfully, one must have adequate savings. It is because a home loan is financed to the extent of 75%-90% of the property cost, with the remaining 10%-25% to be paid from your end. This goes to tell the importance of savings in a home loan. While many can manage such savings for just one home loan, others can do it for more than one. But how many times can the latter group of people take a home loan? Let’s find out here.
Factors that Dictate the Number of Times You Can Get a Home Loan
Firstly, the number of times you can take a home loan in your name is restricted to five. But if any of the home loans are closed, one can get it for a larger number of times. How many times you will get it also depends on your financial situation prevailing at the time of a particular home loan application. A home loan itself is a massive obligation that one has to fulfill for as long as 30 years. And when you take more than one home loan, the obligation will mount further. All that will have a bearing on your savings and repayment potential. In case the lender finds that you could default when having a fresh home loan, it won’t hesitate to deny that loan application. Let’s check out some factors that will dictate the number of times you can take a home loan.
Income at the Time of Home Loan Application
The income you have by the time you apply for a fresh home loan will greatly dictate whether you get approval for the same. As you already have one home loan running in your name, getting one more will increase the outgo from your end. So, the income you have at that time should be significantly higher than what was the case when you applied for the first time. Home Loan EMIs, despite a drastic fall in interest rates over the last 1 year or so, can be significantly higher considering the surging property prices. Be it the bank or a housing finance company (HFC), it will accept the application only if your income is sufficiently high for you to service both the loans on time. Similar logic will apply when you apply for the subsequent loan.
This is an add-on to the previous point. Now, existing obligations can include your running home loan and any other loan or credit card if you have taken. The lender checks how much the proposed home loan EMI and other debt obligations will consume your net monthly income (NMI). Ideally, the sum of all these should not exceed 50%-60% of your NMI if you want the new home loan to get approved seamlessly. This is called Fixed Obligation to Income Ratio (FOIR). In case the FOIR exceeds the stated limit, you may have to ask the lender to extend the tenure. With that, the new home loan EMI will reduce and remain in that bracket as stated above. But the extension of the home loan tenure will depend on how much work-life you are left with. In case you are applying for a second home loan at the age of 40 years being salaried, you can’t apply for more than 20 years as you will most likely retire at 60. You may not get an extension in that case. So, what should you do? Either you should pay more than 10%-25% of the property cost or search for a loan to buy a property costing much less. Any of the two options will reduce the loan amount and the EMI that follows, making it easier for the lender to approve the fresh home loan.
As it’s the case of more than one home loan, not only your income but also the type of job you have and the reputation of the workplace will decide whether you will get a fresh home loan. If you are working in a top company, the lender won’t hesitate to approve a fresh credit provided you have the required income and other debt obligations under control. Secondly, the lender could check whether you have changed the profession between when you applied for the first time and when you apply for the next time. Suppose you have applied for the first home loan being salaried. And if you apply for the second and subsequent home loans being self-employed, the equation might change then. The lender will evaluate your business operations thoroughly and figure out whether a new home loan is feasible in such a situation. Business incomes can be erratic and if you go on to do a business that depends mainly on seasons, the loan application could be denied. If somehow you get an approval, either the loan amount will be less than what you apply for or the interest rate will go up.
What Happens If You Apply from the Third Home Loan Onward?
Once you apply for a home loan more than two times, it will come under a commercial real estate (CRE) loan provided all home loans are running. In case any of the loans are closed and the number of running home loans in your name falls below 3, there won’t be any CRE home loan. The reason why a CRE home loan is an important consideration is that it comes with a greater rate of interest compared to a regular home loan. The table below is a proof of the earlier point. Take a look.
|Lenders||CRE Home Loan Rates (In Per Annum)||Normal Home Loan Rates (In Per Annum)|
|State Bank of India (SBI)||7.45%-8.10%||6.70%-6.90%|
|HDFC Limited||8.75%-9.75%||6.70% - 8.00%|
|PNB Housing Finance (PNBHFL)||9.80%-10.75%||7.20% - 8.90%|
|LIC Housing Finance (LIC HFL)||9.50%-10.50%||6.66% - 7.90%|
|Bank of Baroda||7.25%-8.65%||6.75% - 8.25%|
|Canara Bank||7.40%-9.40%||6.90% - 8.90%|