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5 Things to Watch Out For If You Are Applying for an NRI Home Loan
Banks offer their NRI account holders a wide range of facilities, including home loans. These loans can be taken for purchasing properties in both, India as well as their country of residence. Home loans can be repaid in equated monthly instalments over a specific tenure by paying interest on the principal amount loaned. The tenure and interest rate quoted may differ from lender to lender. If you are looking to apply for an NRI home loan in India, here are 5 things to watch out for.
In order to apply for the home loan, you need to check whether you fit into the lender’s eligibility criteria. Your NRI home loan eligibility criteria depend upon factors such as your disposable income, your existing loan obligations, and most importantly, your credit score; which should be more than 750 points to qualify for the home loan. Also, if you are living and employed in a country that has a restrictive repatriation policy, the lender will only consider your repatriable income to determine your loan eligibility. A few lenders also consider your educational qualification and the number of years spent abroad as a part of the eligibility criteria.
The loan repayment tenures for NRI housing loans differ from lender to lender. Typically, you can repay the loan in tenures lasting up to 30 years; however some banks may also provide shorter loan repayment tenures, lasting only up to 20 years. Also, the tenure may depend on your employment status; whether you are self-employed or salaried. To make the loan more affordable, and to decrease the overall cost of the loan, it is better to opt for shorter tenure loans. You can opt for higher tenured loans if the EMI amount doesn’t fit into your budget.
NRI housing loans are typically repaid through the remittances sent by the borrower from abroad, through basic banking channels or through savings deposited in NRI accounts. Apart from NRE or Indian savings accounts, loan EMIs may also be repaid through NRO accounts – an NRI account in which you can deposit savings from your sources of income in India such as market investments, rent from property owned, etc.
Most banks offering NRI home loans insist that your assign a resident Indian as Power of Attorney to manage your loan. This is because it is not possible for the bank to reach out to the primary borrower based abroad all the time. Bank needs a liaison or a contact to deal with issues related to the loan or the property in question. Generally, lenders prefer the Power of Attorney to be drawn on the borrower’s spouse, parents or children residing in India.
The LTV ratio determines the amount of money you need to pay as down payment and the amount you can get as loan. LTV ratio is generally determined by the RBI and depends upon the loan amount borrowed. For instance the LTV ratio is 90%, 80% and 75% for loans of ₹30 lakhs, ₹30 lakhs - ₹75 lakhs and over ₹75 lakhs respectively.
Final word: Before you begin the home loan application process, remember to use both, the NRI house loan eligibility calculator as well as the EMI calculator. While the former helps you understand the maximum loan amount you are eligible for, the later helps you understand the EMI payable against the loan. Both calculators can help you prepare for the loan, even before it is sanctioned.
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