Buying your own house at a young age is a big success and these days young professionals are also successful in doing so. But most of the population of our country, who have just started earning, do not even think about it. But this is what is inadvertently pulling them back. Financial advisors also recommend buying a house at the beginning of their career. According to him, this is the right time. When you are young and start earning, you have no responsibility. Therefore, this is the best time to invest and strengthen yourself financially.
But most of the young professionals prefer to stay in pleasure nowadays instead of getting into these financial mess. One of the big reasons they don’t think of a big investment like buying a house is that they think ‘they earn less and won’t be able to afford to buy a house’ and they are more fun than managing finance and investment. Go. It is the common thinking of young workers that first we start earning well and after that we will start our financial life. Here, they forget one thing that on the basis of your experience and age, your salary will increase and with time responsibilities will also come. But now it is possible for the youth to buy their dream home. They can do this through step up home loan.
What is a step up home loan?
A step up home loan is a loan in which a person pays a lower EMI in the initial years of loan repayment. As the period increases, the EMI also increases. This is a loan option in which the lender is confident that the customer’s annual income will increase in the coming years. So the lender gives the customer a repayment schedule, which is linked to the customer’s growing income. In such a situation, the customer pays less EMI in the initial years and increases it after increasing the duration and income.
Reduced EMI burden
The low burden of EMI in the initial years is right for those who have just started their career.
When you choose a step up loan, your loan eligibility also increases. Step up loans are available only to the employed people, who are stable in their career, the job is good and there is a chance of increasing salary in future. On the basis of these parameters, the loan eligibility of the customer increases.
You get more tax benefits
Since the majority of the initial instalments go into interest, the customer can also avail the tax for a longer period.
Savings on interest
Along with the advantages in tax, the cost of borrowing is reduced. You can invest savings somewhere so that you get more returns.
Benefits of step-up home loan
1. Step-up home loan increases loan eligibility by 5% – 30% depending on the future earning capacity of the customer.
2. In the initial years of step-up home loan, EMI is low and it also increases with the duration as the salary ratio will also increase with time.
3. Banks do not approve step up loans as there is a lot of risk. Career can be good and bad time can also come. In future, the customer’s job can also go, which will be quite risky for the lender.
4. Since there is a lot of risk in step up home loans, therefore, banks do not offer these loans to businessmen.
5. Banks offer step up home loans at a fixed rate of interest.
Step up home loan limits
At the beginning of step up home loan, a major part of EMI is included in EMI itself. As a result, the outstanding principal amount decreases slowly. If someone chooses a floating interest rate, they will have to pay more interest than the fixed interest rate.
Be sensitive while choosing step up home loan. Choose the percentage of increment for EMI for the future very carefully. In general, and try to use 2-3 percent inflation as per your expected salary increase. Choose a fixed interest rate option instead of the floating rate option. Borrow as much as necessary so that you can repay easily.
Remember that people with low salary can also buy high-cost properties through step-up home loans. Estimates of the customer’s future salary and job security are important points of this loan.