How much home loan can you get based on your salary

Home loan eligibility majorly depends on your income and expenses. Banks bear a risk of non-payment of home loans, so they consider a few factors before offering you the loan. Among various determinants, your salary is the most important factor as it shows how easily you can repay your loan. All banks require you to satisfy their minimum salary criteria in addition to other eligibility requirements. So, let’s dive into the details and find out how much home loan you can get on your salary.

How does your salary impact home loan eligibility?
 

Purchasing a house requires huge capital investment and banks bear a level of risk in offering such amounts. Before providing loans, banks and financial institutions determine your eligibility for a home loan on your salary.

Your income is not the sole factor that is considered when it comes to your home loan application getting approved. Banks also take your expenses into account to see how well you manage your debts and finances. Depending on the amount you earn, you can decide on the home loan amount that you can acquire.  

If you are looking for a convenient home loan with lenient criteria, IDFC FIRST Bank home loan are the most suitable options. Along with low-interest rates, you also get lenient criteria and high home loan amounts on salary. Moreover, you get an extended tenure of up to 30 years to repay your loans conveniently.

How do banks decide how much home loan you can get on your salary?
 

Most banks usually use the EMI/NMI ratio or the multiplier method to calculate how much loan you can get on your salary.  In the EMI/NMI ratio method, the banks consider your running EMIs and the NMI (Net monthly income) and based on the calculated ratio, they decide the total home loan that you can get on your salary.

Anyone below a 60% EMI/NMI ratio can usually acquire a home loan.  However, depending on this ratio, banks can increase or decrease interest rates. The lower the ratio, the better chances you have of getting a higher loan amount at affordable rates.

On the other hand, in the multiplier method banks calculate the maximum home loan that you can get on your salary by multiplying your NMI by a factor between 60 to 72 or the annual income multiplied by a factor of 5-6. Let’s understand this with an example below.

If you have a net salary of ₹40,000 and thinking about how much home loan can you get on a salary of ₹40,000, here is how you can calculate.

₹40,000*72 = 28,80,000

So, the maximum amount of home loan that you can get on a salary of ₹40,000 is ₹28.8 lakhs. The amount can increase if two earning members are co-financing the property.

Banks consider your salary as an important factor while determining your home loan eligibility. In addition, several other factors such as expenses and other running EMIs are also considered for determining how much loan can you get on salary. However, when you apply for a home loan, always prefer a lender who offers lower interest rates and lenient criteria to enjoy affordable home loans. Moreover, you can consider opting for an extended home loan tenure as it helps bring your EMIs down, making it easy to manage your finances.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.