Step up home loan is one type of home loan, which provides the borrower to get the loan amount beyond its eligibility. Step up home loan is generally provided for the young people. On the assumption that they will pay the amount in the future. As young people will get the salary less in the beginning and later they will get hike in their salary every month. That can help the employee to get paid the EMI and interests without any hassle. Step up home loans have no standard form which follows by every bank. Each bank follows their own rules and standards to sanction the step up home loan.
This loan paid the way for the candidate to apply the loan, based on their eligibility of tenure and to schedule the lower EMI. All these will help the young candidate to take the home loan and pay the interest in the first half and in the second half they will pay the interest and EMI.
The lender first checks the borrower’s repayment ability before sanctioning of the loan. As a lender, don’t want to suffer because of the borrower, in case if the borrower is not in a condition to repay the loan taken. Bank before sanctioning of the loan, lenders check the credit history of the applicant as it shows the repayment ability of the candidate. CIBIL Report maintains the entire credit details of the applicants also they maintain how many loans the applicant has taken and how many credit cards they maintain and how often they make use of credit card and other credit history. The Lender also calculates the Fixed Income to Obligation Ratio (FIOR). The lender generally provides the loan within 40% FIOR of the applicant above FIOR they won’t provide.
In this case, step up home loan come into the picture to provide a home loan to young people. So that, they can pay the lows EMI in the beginning as the interest after that they can pay both the principle and interest amount. It’s come up as a great help to the young people to purchase the home of their own at an early stage of their career.
What are downsizing of step-up home loans?
The lender provides the step up home loan to the applicant even they don’t satisfy the eligibility criteria of the home loan. In an assumption that they will pay the EMI as their salary will increase in the future. What if in case, they don’t get the hike in their salary or they may get lost the job or any other reasons. In these cases, the applicant will have to suffer and have to pay the EMI and the principle amount as per the scheduled amount on same salary.
Also in Step up home loan you have to pay the higher interests to the lender. So before applying for the step up home loan, you must be sure that you will get the hike in your salary. Or it’s best suited for government employees who have less salary in the beginning, with the time they will definitely get the hike in their salary. So that they can easily manage the loan amount to pay.