How to Calculate the Turnover for Home Loan If You are Self Employed
Jul 17, 2017 Home Loan
Lenders are always suspicious to give out a loan if the borrower is self employed. For a self employed person, it is very difficult to get a loan. No matter how difficult getting loan is, if you keep your documents in order, maintain your credit score, pay your existing loans in time, file your taxes on time. These will ensure you get your loan on time based on your total yearly turnover.
Every lender has a pre assigned industry margin and it depends on the turnover of the buyer how much loan can be sanctioned to him.
How to home loan eligibility is calculated:
The business of the self employed person should be registered and at least three or more years of tax must have been filed.
Income generated from internet and rent can also be added to raise the margin of your income.
Income from enterprises, partnership etc can be used to increase the overall income of the buyer.
Non cash expenses can be added back to the net income of the business to decide that they are eligible for a higher loan amount.
Turnover method:
Turnover calculates how quickly the company is able to sell the inventory or how fast the company collects the cash from the accounts receivables, during a specific period of time.
There are three major benchmarks that are used to calculate the turnover:
Growth in turnover
Cash profit
Tangible net worth
Property and business inspections are pre requite for the inspection and banking the calculation of the turnover:
The lender can visit the business premises even after the loan has been sanctioned.
Bank statement of twelve months or more can be required to calculate the turnover.
Banking habits of the buyer are assessed deeply by the lender.
At least 50 percent of the annual turnover must be reflected in your bank account.
Turnover calculation:
Turnover depends on a number of net sales of the businessman or the enterprise.
Every lender has a different percentage of turnover.
Profit before the depreciation and interest and taxes (PBDIT) are also calculated.
Lender on the basis of the banks’ fixed multiplier for turnover calculation considers ‘n’ times of ascertained PBDIT.
Home loan eligibility is considered as the lower of the two values i.e., fixed percentage of turnover or the ‘n’ times the PBDIT, using banks’ fixed multiplier.
Loan to value (LTV) under ‘turnover scheme’
LTV is fixed at 75 percent at 75 percent but for some deserving cases, it can go up to 80 percent.
Every lender has a pre assigned industry margin and it depends on the turnover of the buyer how much loan can be sanctioned to him.
How to home loan eligibility is calculated:
The business of the self employed person should be registered and at least three or more years of tax must have been filed.
Income generated from internet and rent can also be added to raise the margin of your income.
Income from enterprises, partnership etc can be used to increase the overall income of the buyer.
Non cash expenses can be added back to the net income of the business to decide that they are eligible for a higher loan amount.
Turnover method:
Turnover calculates how quickly the company is able to sell the inventory or how fast the company collects the cash from the accounts receivables, during a specific period of time.
There are three major benchmarks that are used to calculate the turnover:
Growth in turnover
Cash profit
Tangible net worth
Property and business inspections are pre requite for the inspection and banking the calculation of the turnover:
The lender can visit the business premises even after the loan has been sanctioned.
Bank statement of twelve months or more can be required to calculate the turnover.
Banking habits of the buyer are assessed deeply by the lender.
At least 50 percent of the annual turnover must be reflected in your bank account.
Turnover calculation:
Turnover depends on a number of net sales of the businessman or the enterprise.
Every lender has a different percentage of turnover.
Profit before the depreciation and interest and taxes (PBDIT) are also calculated.
Lender on the basis of the banks’ fixed multiplier for turnover calculation considers ‘n’ times of ascertained PBDIT.
Home loan eligibility is considered as the lower of the two values i.e., fixed percentage of turnover or the ‘n’ times the PBDIT, using banks’ fixed multiplier.
Loan to value (LTV) under ‘turnover scheme’
LTV is fixed at 75 percent at 75 percent but for some deserving cases, it can go up to 80 percent.
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