HOW MUCH WILL THE BANK GIVE YOU?

PARAMETERS BANKS USE TO LEND THE LOAN


INSTALLMENT TO INCOME RATIO(IIR):
This is one of the parameters to calculate the loan eligibility of a borrower.It is generally expressed as a percentage.This percentage denotes the portion of the customers monthly installments to the home loan borrowed.This varies between 33.33-40%.
e.g the IIR ratio is 50%. The gross income is Rs 2lacs/month,then the borrower is eligible for a loan where the installment does not exceed Rs 1lac/month.


FIXED OBLIGATION TO INCOME RATIO(FOIR):
In FOIR calculation,the bank takes into account the installments of all other loans previously availed of by the borrower,including the home loan applied for. In other words,this ratio includes all the fixed obligations that the customer is supposed to pay regularly on monthly basis. The fixed obligations do not include statutory deductions from the salary like P.F,professional tax and deductions for investment like voluntary provident fund, insurance premium,recurring deposits etc.
e.g,Assume an income of Rs 50,000/month.Assume monthly payments of car loan Rs 10,000,TV loan Rs 5000,and proposed housing loan Rs 10,000.Accordingly the FOIR is 50%.The bank may have a standard of 40% of FOIR.So the total installments a person can pay, as per the FOIR of the bank would be Rs 20,000/month. As he is already paying Rs 15,000 towards the car and TV loan,he has Rs 5000 left.The loan would be calculated taking Rs 5000/month as the housing loan repayment capacity of the borrower.


LOAN TO VALUE OR COST RATIO:
Loan to value ratio(LTV) and loan to cost ratio(LCR) are two variants, yet another method. The bank uses these ratios to calculate the loan amount that a person is eligible for on the total cost of the property.There is an upper limit on the maximum loan amount that a person is eligible for irrespective of the eligibility.The maximum amount of loan eligible is pegged to the cost or value of the property. The loan eligibility as per the other parameters may be higher but the loan amount cant exceed the cost or value of the property. The ratio varies between 70-90% of the registered value of the property.