Banks get stringent on home loans

Source : IBnlive

Mumbai: Banks are playing it safe when it comes to home loans. They're putting in stringent safeguards against possible defaults, which means financing your dream homes may get tougher now. With hardening home loan rates, banks are putting stringent mechanisms to check defaults. Bank of Baroda has recently introduced variable eligibility criteria for its home loans.

The eligibility for people earning above Rs 1 lakh a month has been increased from 60 to 70 percent making it possible for them to take more loans than earlier. But for those earning below Rs 20,000 a month the eligibility has been decreased from 60 to 50 percent.

“We want to ensure that they have enough money left for other expenses after paying their EMIs,” said Ajay Kumar General Manager, Bank Of Baroda.

Private banks, which already had differential eligibility in place, are becoming more conservative in amount of loans given out. Kotak bank has reduced its loan to value ratio. Earlier it stood at 90 percent however now its been reduced to 80 to 85 per cent. HDFC too has reduced this ratio from 85 to 80 percent for most cases a few months back.

Which means that for a Rs 10 lakh home loan you will now get a loan only upto Rs 8 lakh as against Rs 8.5 lakh that one used to get earlier.

Even ICICI bank has now become more conservative on property valuation for home loans. Home loan rates have gone up by 3 to 4 percent in the last 18 months. With EMIs swelling and eligibility declining, customers are losing out on both fronts.