Who am I?
I am a home loan with a difference. I am a kind of loan, which helps you leverage your future expected salary hike to increase the eligibility of the home loan you want to avail at present. In other words, I allow you to increase your loan amount eligibility, keeping in mind your future career growth.
How much do I offer?
Let’s assume, your current monthly income is Rs 20,000. In that case, you can afford a loan of around Rs 13.65 lakh for 20 years. At 9% interest rate a year, your equated monthly instalment (EMI) would be Rs 12,272. For the same income and term, you may get around Rs 14.80 lakh or more under me, depending on your situation. In fact, I can increase your eligibility by 5-30%, depending on case to case and the potential amount of salary increments that you expect in the future. If you work in a sector, which is doing well and expected to do well in the future, you usually get a better amount as step-up loan.
How do I work?
I usually group the loan term in slots. Usually, its two-three but it really varies from lender to lender. Therefore, the EMI in the initial years will be lower and will increase later. Keep in mind that as time passes by, your salary will also increase and your capacity to repay will also increase. So if your loan tenor is 20 years, then first three to four years, you will service a lower EMI, after which the amount will go up.
Whom do I work for?
I work well for someone who is at the beginning of her career and is looking to increase her home loan eligibility amount and does not mind incurring a loan that costs more. Keep in mind that as compared with a regular home loan, a step-up loan comes at a higher cost.
Things to keep in mind
Lenders have stringent eligibility criteria and are restrict themselves to salaried individuals with promising careers and qualifications. Also, if you are going for a step-up loan, it’s best to stick to a fixed rate of interest loan, rather that facing the unpredictability of a floating rate interest loan. I may not suit everybody so have a word with your financial planner to make sure I would work for you.