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How Much Home Loan Can I Get On My Salary?

Author: Houssed | Posted on: 24-Feb-2024
How Much Home Loan Can I Get On My Salary?

The question, 'How much home loan can I get on my salary?' always arises when someone becomes a homeowner while working for a living. We are here with answers to all your queries. Through this guide, you'll discover important details about qualifying factors.

Other significant elements influencing your eligibility, such as comprehending the amount of your payment that is taken into consideration and figuring out typical payment orders and their matching eligibility limitations, are also covered. Furthermore, you can also learn how simple the application process is for a home loan.

What is a Home Loan?

A home loan is a secured loan where security is used to purchase property. Home loans offer complementary financing for long terms and reasonable interest rates.

Non-Banking Financial Companies (NBFCs), banks, and other financial institutions offer home loans to people looking to buy a home. Recently, home loans have become popular in India due to the phenomenal rise in property prices and the growing need for affordable housing.

How to Calculate Home Loans Based on Salary?

The outcome of your loan application depends on several factors, including your income, age at the time of application, credit history, monthly payments, the property itself, and generally, even all your professional skills.

Based on your basic pay, medical allowances, housing allowances, commissions(if any), travel allowances, and other benefits that are included in your salary, which can be your salary in hand or your salary after all deductions, as shown in your bank statement will be considered when calculating your home loan.

Furthermore, a property's loan-to-value ratio, or LTV, is what financial institutions base their eligibility on. Your home loan amount is represented by the smaller of these two ratios. Most financial institutions have their loan rate calculators on their websites.

Home Loan Eligibility According to Monthly Income

A home loan applicant's age, credit score, income, and other characteristics are typically considered by lenders before approving an application. Most lenders typically offer a loan amount that is 60 times the borrower's salary.

A quick overview of home loan eligibility based on various salary brackets:

Monthly Income (in Rs) Max Home Loan Amount Eligibility (in Rs) EMI; Tenor- 30 Years & ROI 6.9% p.a (in Rs)
25,000 15,18,372 10,000
50,000 34,16,337 22,500
75,000 56,93,895 37,500
1,00,000 75,91,860 50,000
1,25,000 1,04,38,807 68,750

Disclaimer: The numbers used are only intended to be representative. Check out the most recent offers and interest rates on home loans for an accurate analysis.

Things to Consider Before Getting a Home Loan

Consider your salary amount

When contemplating a home loan, the first crucial step is to evaluate your salary carefully. Understanding your income is paramount as it sets the foundation for determining the loan amount you can comfortably manage.

Consider the EMIs you need to pay every month

Before securing a home loan, it's crucial to weigh the monthly EMIs you'll be committed to. The loan amount and EMI relationship are significant, with higher loan amounts resulting in larger EMIs. EMI obligations and higher rates contribute to larger EMIs. Always opt for EMIs that balance meeting your housing needs and aligning with your financial well-being.

Consider the interest rates offered by lenders depending on your CIBIL score, age, salary, etc

When taking a loan, it is essential to consider various factors that can affect the interest rates. These factors include your CIBIL score, age, salary, and financial stability. A higher CIBIL score indicates a lower risk for the lender, which can lead to lower interest rates.

Age and economic stability also play a crucial role, as younger individuals have longer earning potential. Additionally, your salary and debt-to-income ratios can influence the interest rates you may be offered. Lower ratios indicate that you have a healthier financial position, which can be beneficial for getting lower interest rates.

Consider the down payment amount

When contemplating a home loan, considering the down payment amount is crucial. Assess your financial capacity and aim for a down payment that aligns with your budget while considering the lender's requirements. A substantial down payment reduces your loan amount and showcases financial responsibility to potential lenders.

Consider the trustworthiness of the lender

Trustworthiness is a crucial factor in evaluating potential lenders. It goes beyond financial terms and conditions, focusing on reliability, integrity, and ethical conduct. Key factors include financial transparency, reputation in the industry, compliance with regulations, clear and understandable terms, responsiveness and communication, protection of personal information, consistency in lending practices, and a customer-centric approach.

Home Loan for Salaried People

The lender considers your net salary

Lenders rely on the borrower's monthly salary to predict the EMIs they can pay. For instance, if Mr. Verma earns a monthly salary of Rs. 60,000, he could be eligible for a home loan for a property with a minimum value of Rs. 40 Lakh in a city like Mumbai or Delhi.

The lender considers your repayment capacity

When you apply for a home loan, lenders consider your ability to repay the loan promptly and comfortably. This assessment is based on several factors, including financial stability, income, expenses, and debts. Based on this evaluation, they can offer you a customised loan to fit your financial circumstances.

The lender considers your credit score

A home loan, lasting up to 20 years, requires lenders to evaluate credit scores to ensure repayment behaviour. A high score indicates responsible borrowing and may increase the loan sanction amount. Ideally, a credit score of 750 or higher is required for consideration.

The lender will consider your age

Lenders consider age when approving home loans, especially individuals in their mid or late 40s, as they may be considering retirement. Despite high salaries, the loan may extend to retirement.

How to Increase Home Loan Eligibility with Low Salary?

Opt for a Joint Home Loan

  • Applying with another employed applicant can enhance house loan eligibility
  • It increases the chances of loan approval
  • The lender considers both applicants' income, providing a better loan amount
  • It can be a good option for those with a low salary who are looking to purchase a high-value property

Clear Any Existing Loans

  • Before the loan application, clear all existing loans to increase the chances of approval
  • Pay off personal or vehicle loans and credit card debts
  • Regularly repay credit card debt to avoid interest payments
  • Home loan applications from debt-free borrowers often receive easy approval

Improve CIBIL Score

  • Aim for a credit score above 750 to avoid loan rejection
  • Improve credit scores by paying off existing loans and maintaining a 30% credit utilization ratio
  • Pay off all EMI and credit debts on time
  • Good credit repayment behaviour can increase loan eligibility

Mention Additional Income Sources

  • Increased cash creation boosts loan eligibility
  • Use income-generating assets
  • Consider renting a second house if not on rent
  • Income must be included in income tax returns

Advantages of Getting a Home Loan

Sense of Accomplishment

  • Buying a home provides an immense sense of accomplishment.
  • It cultivates substantial sentimental value.
  • It allows customization of the living environment.
  • It Provides peace of mind for tenants.

Capital Appreciation of Your Home

  • Real estate appreciates faster than other assets.
  • The Indian market sees 15% annual growth in this segment.
  • Rentable properties can provide regular income.

Tax Benefits of Getting a Home Loan

  • Maximum tax benefit of Rs. 2 Lakh on interest paid and Rs. 1.5 Lakh on the principal amount.
  • Both owners can enjoy tax benefits on individual taxable income.
  • Co-applicants can increase their chances of home loan approval.

Better Credit Score for More Loans

  • Regular EMI payments improve credit scores.
  • Credit score gauges loan security for other purposes.
  • A good credit score aids in obtaining loans for property or business.

Conclusion

What is a home loan? Home loans provide long-term financing for property purchases, offering reasonable interest rates and EMIs. Popular in India due to rising property prices and affordability.

How much home loan can I get on my salary? Home loans typically require 60 times your salary, but lenders typically exclude in-hand salary, medical benefits, vacation, travel expenses, mortgages, and other benefits, as they are not eligible for financial institutions.

How to calculate a home loan based on salary? Qualifying for a home loan depends on income, age, credit history, monthly payments, property, and professional skills. Salary, medical, housing, commissions, and travel allowances also determine eligibility.

Home loan eligibility according to monthly income: Most lenders offer a loan amount 60 times the borrower's salary. Eligibility depends on monthly income, maximum loan amount, EMI, tenor, and ROI. Loan amounts range from Rs. 25,000 to Rs. 68,750.

Things to consider before getting a home loan

  • Consider your salary amount.
  • Consider the EMIs you need to pay every month.
  • Consider the interest rates offered by lenders depending on your CIBIL score, age, salary, etc.
  • Consider the down payment amount.
  • Consider the trustworthiness of the lender.

Home loans for salaried people

  • The lender considers your net salary
  • The lender considers your repayment capacity
  • The lender considers your credit score
  • The lender will consider your age

How to increase home loan eligibility with low salary?

  • Opt for a joint home loan
  • Clear any existing loans
  • Improve CIBIL score
  • Mention additional income sources

Advantages of getting a home loan

  • Sense of accomplishments
  • Capital appreciation of your home
  • Tax benefit of getting a home loan
  • Better credit score for more loan

FAQ's

A Home Loan is a secured financing for property purchases that offers long-term financing, reasonable interest rates, and return property title to the borrower. They are popular in India due to rising property prices.
Home loans typically require 60 times your salary, but lenders typically exclude in-hand salary, medical benefits, vacation, travel expenses, mortgages, and other benefits, as they are not eligible for financial institutions.
Qualifying for a home loan depends on income, age, credit history, monthly payments, property, and professional skills. Salary, medical, housing, commissions, and travel allowances also determine eligibility. Loan-to-value ratio (LTV) determines eligibility, with a loan equal to 60 times salary.
For self-employed individuals and professionals, lenders in India typically offer home loans up to 2-3 times their annual net income or up to 80% of the property value, whichever is lower. Again, this may vary based on the lender's policies and the borrower's financial profile.
  • Consider your salary amount.
  • Consider the EMIs you need to pay every month.
  • Consider the interest rates lenders offer depending on your CIBIL score, age, salary, etc.
  • Consider the down payment amount.
  • Consider the trustworthiness of the lender.
  • The lender considers your net salary
  • The lender considers your repayment capacity
  • The lender considers your credit score
  • The lender will consider your age
  • Opt for a joint home loan
  • Clear any existing loans
  • Improve CIBIL score
  • Mention additional income sources