- Have you got a call or notification from a bank asking you to re-submit your salary slip for the home loan that was sanctioned earlier?
- YES! Read this post to know what this means to you and what should you do in such a situation
The lockdown, which was imposed on 25th March 2020 and continued in tranches later on, has resulted in massive losses for India Inc. This has resulted in salary cuts and retrenchments of people, forcing banks to stop disbursing home loans and other credits to individuals. If the RBI data is to be believed, the home loan book of banks fell by a massive INR 8,225 crore from March 27 to April 24 this year. Before the lockdown came into effect, individuals who booked a flat and their home loan was sanctioned are being asked by banks to resubmit their salary slips. In the wake of salary cuts and job losses, banks want to be assured that borrowers can repay the loan on time. And, therefore, they are asking borrowers to submit their salary slip again before the disbursement happens. Read the post further to know what’s in store for home loan borrowers with this latest move of banks.
What Will Happen After You Submit Your Salary Slip Again?
The concerned bank will go through your salary slip in detail and take a call accordingly. According to banks, this is their routine of checking income statements as part of the normal appraisal process. In case you are witnessing salary cuts and that could make timely repayment difficult, banks can allow you to exit the transaction. However, if you default at an early stage of the loan before getting the possession, you will not only lose homeownership but also lose out on the opportunity of accessing the loan at a lower rate of interest.
Shall You Exit from a Home Loan Transaction Wilfully If Your Salary is Getting Cut?
Well, the answer may not be a straightforward one as the situation varies from one individual to another. It all depends on what you are left with post paying the home loan EMI. In a normal situation, you could still have something reasonable left with you after the EMI deduction.
But with salary cuts, you may come to a situation where there is either nothing or very less left with you after the payment of the proposed Equated Monthly Installment (EMI). As told before, a default in the early stage of the loan could take away the homeownership from you while bringing disrepute to your credit profile and putting your future credit aspirations at stake.
If you are surrounded by such a financial situation, it is advisable to opt out of a home loan that was sanctioned earlier. However, even after salary cuts, your situation is such that the home loan EMI payment doesn’t dent your savings much, you could stay in a deal and ensure timely repayments.
As a Prospective Home Buyer, What Shall You Do as Banks Start Revalidating Home Loans?
There could be many who are yet to buy a home and must have got shocked to hear about banks revalidating home loans post the salary cut and job losses owing to lockdown. This can be a learning curve for you as a borrower. Now, you should look to deal carefully in terms of the property you buy via a home loan. Do the loan calculations using the Home Loan EMI Calculator. All you need to do is put the rate of interest, loan amount and tenure in the calculator. Once that’s done, you’ll get to see the EMI and interest payable till the time the loan is on. As far as the loan amount goes, it depends on the property cost and the likely EMI/NMI ratio. NMI or net monthly income defines your repayment capacity for a loan. As a matter of fact, home loans upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh are financed upto 90%, 80% and 75% of the property cost, respectively. You need to pay the remaining amount to the seller.
Now calculate the EMI considering the rate of interest that prevails, the loan amount you will need to take, and the tenure you want to pay the loan. Banks would like to see your total monthly obligations including the proposed home loan EMI remain within 50%-60% of your net monthly income, although this criterion is subject to change based on one’s income and repayment capacity.
Given the present situation that calls for more savings, you could do yourself a favour by choosing a property at a lesser cost so that the EMI will fit even more. The interest will also come down with such a decision. As banks start reassessing home loans, it’s time you reassess your income in light of the present situation so that you can make the right call on the loan.