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Advantages and disadvantage of borrowing a higher loan amount

It is always exciting to look around, hunt for new properties and search for a dream home. But the next step in the process – reconnoiter or explore for the home loan – is not that exciting. Even if you find the right property as per your expectations, you will always find yourself in dilemma over whether you will be able to avail enough funding to transform the dream into reality.

So is there any possibility of reversing the process? What if you get an assured home loan before you start looking for the dream home or approach the builder for further negotiation? Would it not be better to avail an assured loan amount rather what you initially had in your mind?

Large amount of pre-approved home loans can be a solution to the above questions. This can prove to be a good option for those who are looking forward to buy a property in near future. The experts of Mudra Home list the following advantages and disadvantages of getting a pre-approved and sanctioned higher loan amount.

The benefits

  • Many times it happens when we invest lot of time and effort in hunting and finalizing our dream home. After completing the first process we realize that we cannot afford the expensive price of the property as the home loan eligibility does not match to the total cost. So, the biggest advantage that you can get by approving and getting sanctioned the higher loan amount is that you have enough budget to plan and the purchase fits well in your pocket. As by availing this, the borrower gets a clear idea about the total cost being lent by the Bank/ NBFC and the amount to be arranged by the borrower on its own.
  • Another privilege of advance sanctioned loan is that it saves you from the inconvenience of boosting the loan amount at a later stage of construction or any unpredictable expenses. The extra sanctioned amount serves as a cushion in case of any delay during the completion of the project.
  • There may be a possibility that your choice ends at a lower price what you initially got sanctioned then you can borrow only what you need. This will allow you to have a space for top-up loan at a later stage.
  • This higher sanctioned loan amount can also be used as a bargaining tool to avail better deals and discounts from other lenders.

The Drawbacks

  • This is quite predictable, in case of under-construction properties, to receive a loan amount which is lower than what as actually sanctioned.
  • In case of balance transfer of the home loan, your new lender may not disburse more than the outstanding loan amount on the day of transfer. You might have to opt for a top-up loan in case you were sanctioned a higher home loan amount.
  • The calculation of EMI’s may become too complex as the EMI’s are calculated as per the sanctioned loan amount and not on the disbursed amount. The EMI calculation can be quite complex in case of pre-EMI option.

The above points give you the clear picture of the benefits and the disadvantages of availing a higher amount of loan. The loan amount can only be increased by showing the increased income. The following tips can help you to avail a higher amount of loan sanctioned:

  • Eligibility calculation can be increased by including the income of your employed partner. This happens because the EMI’s are calculated by combining the income of both the partners.
  • Additional incomes such as rent can also be added to the present income to increase the loan eligibility calculation.
  • The most important way to increase the loan eligibility calculation is to pay off the other debts and loan accounts that you already have.


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