Loans with longer tenures
Getting loans and setting up a proper financial plan for the payment of an investment confuses people many a time. Whether you are looking to buy apartments in Perumbakkam, Sholinganallur or other areas on OMR, planning your finances are essential. There is some good news for prospective home loan borrowers, especially younger borrowers. Banks are now becoming more liberal in granting loans to younger borrowers. They are now willing to offer home loans for tenures as long as 30 years to first-time borrowers.
This will help both developers as well as prospective homebuyers. For prospective property buyers, it will help finance a substantial portion of the cost of a new home.
The Reserve Bank of India (RBI) reduced the repo rate by 125 basis points since January 2015. This has helped banks reduce their interest rates on loans as well. Banks are now trying to push the demand for credit to purchase homes. It is to be noted that till recently banks were comfortable lending with a maximum tenure of 20 years for a home purchase. Anything beyond 20 years was considered risky. The apprehension was that a borrower's ability to repay starts diminishing after this period.
However, in the changed circumstances, salary levels as well as expectations are high. Further, a loan is no longer a bad word. Youngsters are willing to take a higher loan amount for a longer tenure to purchase a property of their choice and need. As such, banks have also changed their strategy and are willing to offer higher loan amounts for longer tenures. Further, with the interest rates softening and the push by the RBI, the EMIs reduce and there is an increase in loan eligibility.
These long tenure loans are generally being given for properties valued at more than Rs 1 crore. Banks are offering these loans to the salaried segment in the age group of 25-30 years who are at an early stage in their careers and at the same time have the potential to be high earners as they grow. Usually, younger borrowers have a problem in getting a higher loan amount in the initial stages of their career. The reason is that the salary levels are lower.
As banks consider the present income of an applicant before deciding on the loan amount, many a time, younger borrowers did not qualify for a higher loan amount, thereby restricting their property purchase to the limited budget they have. Now, banks are changing this trend. Younger homebuyers are availing higher loans for longer tenures such as 25-30 years. At the same time, they now have the capacity to pay EMIs over long tenures too.
For all the young investors working in the IT and other growing industries, buying their dream Perumbakkam flats, OMR flats and other investments just became easier!