It is natural for a person to get emotionally
upset and depressed when his application for home equity loan is turned down,
more so when the financing institution or its agent fail to
adequately convey the reasons for this refusal. Quite often the reason is
lack of initiative on the part of the representative. After all, he has
many other deals to pursue. Following are few major reasons why a home
equity loan can be possible refused. Adequate planning on these issues should see
you succeed with your application and move into a home of your choice or
dreams.1. Minimum Area of the
flat
Minimum area of flat as per the rules of
Housing Finance Company. Each HFC has its own norm. As an example, one
HFC has the norm of 400 Sq. Ft. Ensure that your home equity loan application is for a
property that meets the criterion of minimum square foot for the
concerned HFC.
2. Financial profile of the individual
The most important consideration. Each
HFC has its own stipulation of minimum monthly earnings.
Guarantor is required. Lack of regular income or lack of clarity on
income is a popular reason for refusal of loan. Credit history of
the individual is important ... how many cheques have bounced from his
account. A clean credit history, established regular income ... HFC's
will love you and give you that home equity loan.
3. Family size, savings habit of the
applicant
Larger number of dependents of an
applicant implies lower repayment capacity. Also poor savings habit will
discourage HFC's from giving you a home equity loan. This is ascertained by looking
at your last 6 months bank statement.
4. Age of the applicant
Property cannot be co-owned with a
minor. Likewise, co-owner cannot be above a certain age limit. This is
essentially to avoid ownership disputes. Age limit affects the tenure of
the home equity loan and EMI's as well.
Example: An HFC has an 80-year age limit for the co-applicant. If
the applicant is 40 years old and the co-applicant is 70 years old, then
the home equity loan will be sanctioned for a maximum period of 10 years (80
years minus 70 years). Similarly the applicant’s retirement age is also
considered. For example, if the applicant is 55 years of age and is set
to retire at 60 years, then the maximum home equity loan tenure available will be 5
years.
5. Legal/technical aspects and
discrepancies
Lack of clear title ... no home equity loan
sanction. Registered agreements, history of how the property has come
into existence, especially documents after 1991. Sanctioned plans, bye
laws complied with, all clearances are must.
6. Age, location and resale of property
Home equity loans on resale properties are
sanctioned only if they are less than 50 years old. Likewise, certain
areas or colonies are also marked as being ‘negative’ in the books of
some HFCs. If an individual intends to buy a property in such an area,
then he will not be granted a home equity loan by the HFC. Similarly, the property
also has to fall within the geographical limits as defined by the HFC
for it to sanction the home equity loan.
