Buying a home is a dream of every person, especially in case of NRIs, who always look forward to owning a property in their native country. Many of them buy it for gifting purpose, while sometimes it is purely for investment. Even our Government has also made many norms in order to encourage them to buy their dream property by availing home loans.
Take a look at six factors that NRIs should consider while availing a home loan:
Eligibility for loans
Just like others, an NRI’s home loan eligibility is completely dependent on their credit score, disposable income, job profile, employer profile, etc. If you are a professional working outside the country with restrictive repatriation policy the banks or financial institutions will only consider the repatriable income while evaluating the loan eligibility. Some banks also consider educational qualification and total employment time.
Home Loan tenure and EMI
For those living in India, banks offer a home loan for a tenure of 30 years, but in case of NRI it is offered for 10-20 years and is dependent upon on their country of residence, educational qualification, etc. Also, NRIs must also opt for affordable EMI options as prepaying them will not be of any help.
Type of Interest rate
There are various types of interest rate charges on a home loan. It may be fixed, floating or a mix of both. Loan borrowers have the option to choose from these various types of interest rates. For an NRI, it is advisable to go for floating-rate home loans as they do not penalise pre-payment charges.
Power of Attorney
A power of attorney (POA) is a legal document giving one person the power to act for another person. In case of NRIs banks mainly prefer to appoint a Power of Attorney (POA) while lending them loans. So, if any loan-related issue comes, it helps financial institutions to deal with it in an easier manner. NRIs may appoint their parents, spouse or children as the POA-holder.
By LTV Ratio we mean Loan to value ratio, in which bank captures the loan amount as a ratio to the total property value. As per RBI rules, LTV for home loans amounting to Rs 30 lakh is 90%; between 30 lakh to 75 lakh, it is 80% and for more than 75 Lakh it is 75%. However, while financing home loan for NRI, banks also look into various risk assessment parameters in determining LTV. A lower LTV ratio leads to lower EMIs and interest cost while a higher ratio can lead to higher EMI and interest cost. So, NRI must take care while choosing the LTV ratio that they should have enough financial backing and emergency funds to maintain their goals.