Many banks and housing finance companies offer mortgage products to self employed, beyond the plain vanilla mortgage products offered to salaried individuals.Products like banking surrogate. gross profit margin, net profit margin or industry margin are designed to suit the needs of selfemployed individuals for home loans and home equity segment. Many of such loans also fall under the priority sector, therefore the banks focus more on such small loans.
The starting point for the self employed income calculation would be the net profit. The expenses booked earlier like the depreciation, interest paid on capital and directors / promoter / partners salary etc are added back to the net profit. The figure so arrived at is divided by 12 and upto 70% of this number can be taken for the EMI for the current loan. If there are any existing loans or fixed obligations those are deducted from this number to arrive at the EMI that an individual can pay to the bank. Based on this monthly commitment that the customer can make for repayment of the loan the loan amount is decided.
Some banks also offer banking surrogate loans. In such cases the customer's banking history becomes the basis of the credit appraisals. Upto 75 to 80% of the average quarterly balance maintained in the bank account for the last one year can be taken as the EMI payment capacity of the customer and basis this the loan eligibility would be calculated. The customer shouldn't have taken any loan during the last 6 months in such a case. Currently such loans are restricted to Rs 2 crores under the banking surrogate and the LTV (loan to value ratio) is also restricted from 60 - 65% of the Property market value.
Gross profit margin / net profit margin / industry margin etc are other products for SENP (self employed non-professional). For self employed professionals loans are also sanctioned on the gross receipts basis. In such a case generally the bank / housing finance company appoints a chartered accountant to evaluate the business and business practices of the firm and submit a report on the profit margin of the company. This profit margin is taken for the eligibility calculations.
You can check your eligibility for Home loan or loan against property by using our eligibility calculator through the left menu or through the radio button at the top of this page. The eligibility calculation is only indicative and for your planning purposes only. You can check with us or the respective bank for mortgage suitable to your requirement and your eligibility calculation.