How to Calculate Home Loan Eligibility Based on Salary?
Before you start with the Home Loan process, it is important that you determine your total loan amount eligibility, which will largely be based on your repaying capacity. This capacity in turn would be based on your net monthly salary. Net monthly salary is the amount left with your after deductions like income tax, professional tax and public provident fund (PPF). Salaried employees looking for a housing loan need to have a strong monthly income for a high Home Loan eligibility.
However, it's important to note that lenders do not take your entire in-hand salary into account when calculating the loan amount. Your in-hand salary may consist of several components, namely
- Basic
- Medical allowance
- Leave travel allowance
- HRA, and other allowances
It's worth noting that lenders only consider your basic salary when determining your loan eligibility. Allowances like medical and leave travel are provided for specific purposes and are therefore excluded by financial institutions.
For example, if your in-hand salary is Rs. 50,000 but after excluding medical allowance, LTA, and other such allowances, it comes down to Rs. 41,000, the loan amount you're eligible for will be calculated based on the latter amount.
Assuming you're a 30-year-old resident of Pune with no current EMIs or other financial obligations, the table below shows how much loan you can get for home based on your salary between Rs. 25,000 to Rs. 60,000.
| Net monthly Salary | Home loan amount |
|---|---|
| Rs. 25,000 | Rs. 12,91,895 |
| Rs. 30,000 | Rs. 15,50,274 |
| Rs. 35,000 | Rs. 18,08,653 |
| Rs. 40,000 | Rs. 20,67,033 |
| Rs. 45,000 | Rs. 23,25,412 |
| Rs. 50,000 | Rs. 25,83,791 |
| Rs. 55,000 | Rs. 33,15,865 |
| Rs. 60,000 | Rs. 36,17,307 |
*These amounts are calculated using the Home Loan Eligibility Calculator assuming the city to be Pune and age to be 30 years old.
Despite your regular income, other elements such as your ongoing EMIs and mandatory expenses can influence your ability to repay. Therefore, it's recommended to use a Housing Loan Eligibility Calculator to determine the amount of home loan you can obtain, as this tool takes into account factors such as your income, loan duration, additional monthly income, and existing financial responsibilities when calculating your eligible loan amount.
Factors to Consider When Calculating Home Loan Amount Based on Your Salary
To understand what Home Loan amount is suitable for you, you need to set your priorities straight and take into consideration various present and anticipated expenses. You may then compare them to the income you earn and would possibly earn in the future. You may also consider your current savings that would be required as down payment, without exhausting your entire corpus. With that in mind, you may zero in on properties within your budget and accordingly base your borrowing expectations on that. Here are things you should consider when calculating the Home Loan amount based on your salary.
Understanding Your Debt-to-Income Ratio
Debt to income ratio is an indication of how much you earn versus how much you spend or owe each month. Technically, it is the percentage of your gross monthly income that goes towards payments such as rent, credits, bills and other debts. Lenders use this figure to determine whether or not you can afford to take on more debt. It is expected to have a low Debt-to-income Ratio in order to avail a loan.
Calculating Your Loan Amount
Your net income is a primary determinant in calculating the EMI you will be able to pay, taking into account your monthly expenditures. Most banks/ lenders can lend an amount up to 60 times one’s monthly salary. So, if your monthly salary is Rs.25,000, you can get a loan amount of around Rs.15 lakh. You can use a Home Loan eligibility calculator to determine the tentative amount you can avail as Home Loan.
Consider Your Down Payment and Interest Rate
If you are in a position to pay a significant amount as down payment, you can avail a smaller loan amount in case your current salary does not permit you for a higher loan amount. Try to gather as much money from as many sources to manage your down payment. Once you have the surety of a certain amount, you may calculate the loan amount you need and the EMI you need to pay using the online Home Loan EMI calculator based on the interest rates you might be eligible for.
How to Apply for Home Loan Online?
Applying for a Home Loan can often get confusing for many. If you are wondering how to proceed, here is a step-by-step guide to apply for a Home Loan online.
- Firstly, you will have to visit our Housing Loan application portal and click on ‘New Loan’ if you are willing to apply for a fresh loan. If looking for a balance transfer, click on ‘Transfer Loan’.
- Before filling up the form, consider checking the eligibility criteria, documents required, fees and charges if you haven’t already.
- Carefully fill in your basic information such as name, contact number, DOB, net monthly income and total monthly obligations, and then click on ‘Continue’.
- Then enter the generated OTP and complete the application process.
Once we have received your home loan application request, you can expect a call from our representative within 24 hours* of submission. He or she will guide you through the next application phases.
*Terms and conditions apply.
Frequently Asked Questions:
The loan amount you are offered depends on your profile and the property in question. One of the factors that is considered in your profile is FOIR, i.e., Fixed Obligation to Income Ratio. This defines how much money you are left with to contribute towards the repayment of your Home Loan. Every lender has their own FOIR benchmark. Typically, you can be offered a Home Loan with a FOIR up to 75–80%.
Individuals can avail of up to 75%–90% of the property’s value through a Home Loan. For properties up to Rs. 30 lakh, the LTV ratio can be up to 90%. For properties valued between Rs.30 lakh to Rs.75 lakh, the LTV can be up to 80%. Lastly, for properties valued over Rs.75 lakh, the LTV can be up to 75% of the property value.
Assuming you do not have any monthly obligations, you can avail of a Home Loan worth Rs.44.8 Lakh as a Home Loan with a monthly take home salary of Rs.60,000. To check Home Loan eligibility as per your salary, use our Home Loan Eligibility Calculator.
Note that this is a rough estimate; your Home Loan eligibility cannot be calculated solely on the basis of income.
Assuming you do not have any monthly obligations, you can avail of:
- A Home Loan worth Rs.44.8 Lakh as a Home Loan with a monthly take home salary of Rs.60,000
- A Home Loan worth Rs.52.3 Lakh as a Home Loan with a monthly take home salary of Rs.70,000
A higher monthly income allows for more room for EMI, effectively enhancing your eligibility. This is provided your obligations have not risen in tandem.
Note that this is a rough estimate; your Home Loan eligibility cannot be calculated solely on the basis of income.
Availing of a Home Loan with a co-applicant can help you enhance your eligibility. This is because with two or more applicants, the risk is reduced for the lender. More importantly, your profile also benefits from your co-applicant’s credit score, additional income, etc.
The loan amount you are offered depends on your profile and the property in question. One of the factors that is considered in your profile is FOIR, i.e., Fixed Obligation to Income Ratio. This defines how much money you are left with to contribute towards the repayment of your Home Loan. Every lender has their own FOIR benchmark. Typically, you can be offered a Home Loan with a FOIR up to 75–80%.
When applying for a Home Loan, ensure you include all your sources of income
- Repay existing loans to showcase a higher repayment capacity
- Check your CIBIL score and take steps to optimize it before applying
- Apply with a co-applicant, especially one that has a CIBIL score of 750 or higher and a steady income source
Lenders can finance up to 75%–90% of the property value as a Home Loan. Therefore, the remaining 10–25% must be borne by you.
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