We all dream of owning a home. As we progress in our professional lives, the dream seems more of a possibility. With a home loan, things become even easier. However, real estate doesn’t come cheap. Depending on the part of the country you live in, real estate prices for a modest 800 square feet apartment can range from Rs 30 lakh to Rs 5 crore.
Budgeting and long-term planning are key to managing your housing dreams. If you have been wondering, ‘how much home loan can I get’, do know that the primary consideration of your repayment capacity depends on your monthly salary.
Financial institutions can offer a mortgage to salaried professionals up to a maximum of 60 times their net monthly salary. This is based on the Fixed Obligation to Income Ratio (FOIR).
Keep in mind that the eligibility is calculated on the take-home salary and not Cost-to-Company (CTC), as the CTC includes non-cash benefits such as HRA, travel allowances, perquisites, contribution to Provident Fund, etc.
Here is an example of a home loan eligibility based on salary package (CTC) of Rs 7,00,000 per annum:
Assume the contribution to PF and perquisites totals Rs 85,000 a year. This means the net salary is Rs 6,15,000 per year or Rs 51,250 a month.
In such a scenario, an applicant’s home loan eligibility is estimated at around Rs 51,250 x 60 (max FOIR) = Rs 30,75,000
Additional Read: Is It Possible to Increase Your Home Loan Eligibility?
Check your salary slip and make a similar calculation. However, this calculation only helps estimate a ballpark figure of what the loan amount could be. Various other factors will impact your actual eligibility. Some of these are mentioned below:
Having other ongoing loans such as an educational loan, car loan or large credit card debt can proportionately reduce your eligibility as well.
Financial institutions usually consider a minimum credit score of 750/900. Having a sub-par credit score can reduce your home loan eligibility. You can boost your credit score by settling your credit card dues and debts and paying your bills on time.
Additional Read: How Does Credit Score For Home Loan Work?
You can enhance your eligibility by jointly applying with a working spouse, parent or sibling.
If you opt for a longer tenure, you can reduce your monthly EMIs and increase your eligibility.
Other sources of income
If you have some income from other sources such as rent or investment, submitting proof of such income can increase your eligibility for a higher loan amount.
In addition to factoring your income, the best way to estimate your eligibility is by using a home loan EMI calculator such as the one offered by Tata Capital. The calculator allows you to understand all variables that will impact your home loan commitment.
For a simple, swift and transparent experience, Tata Capital home loan is your ideal partner to help fulfill your dream of owning a home.