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How Much Home Loan Can You Get Based On Your Salary?

mahindra-finance-author

by Mahindra Finance

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April 18, 2024

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4 mins read

Are you planning to buy a home and wondering how much home loan can I get? Banks and financial institutions determine your eligibility for a home loan based on yoursalary. But how much home loan can you get based on your salary? This guide breaks it down for you and to help you understand the process.

Understanding home loan eligibility

Banks assess home loan eligibility by considering factors like income, expenses, credit history, and employment stability. The amount you earn plays a crucial role in determining the loan amount you can acquire. Banks typically offer home loans up to 5-6 times your annual income. However, keep in mind that interest rates may vary depending on the bank.

Calculating home loan eligibility

To calculate your eligibility for a home loan based on your salary, banks use different methods. The EMI/NMI ratio method compares your running EMIs (if any) to your net monthly income (NMI). If your EMI/NMI ratio is below 60%, you have a higher chance of getting a higher loan amount at affordable home loan rates. The multiplier method involves multiplying either your NMI by a factor between 60 to 72 or your annual income by a factor of 5-6. 

For example, if your net salary is ₹40,000 per month, the maximum home loan amount you can get is ₹28.8 lakhs.

Factors affecting home loan eligibility

While your salary is crucial, banks also consider other factors when determining your home loan eligibility:

Expenses: Banks analyze your monthly expenses to understand your debt management and financial stability.

Running EMIs: Existing loans or EMIs can impact the loan amount you can get, as they affect your financial obligations.

It's important to choose a lender that offers lower interest rates and lenient criteria, making home loans more affordable.

Example scenarios

a) Scenario 1:

Single income household

  • Let's say you earn ₹60,000 per month. Using the multiplier method, banks may offer you a home loan of around ₹36 lakhs.

b) Scenario 2:

Dual income household

  • If both you and your spouse are earning, banks consider the combined income for calculating the loan amount.

Suppose you both earn ₹30,000 each per month. The maximum home loan amount using the multiplier method would be approximately ₹36 lakhs.

Sample calculation

- Let's take an example where your net monthly income is ₹50,000 and you have no existing EMIs or debts.

- Using the EMI/NMI ratio method, if your running EMIs are ₹10,000, then the maximum EMI you can afford is ₹20,000 (40% of NMI).

With an interest rate of 8% and a loan tenure of 15 years, you can get a home loan amount of approximately ₹26 lakhs.

Conclusion

Now that you have found the answer to your query of 'how much home loan can I get' based on your salary, it's time to make informed decisions. Consider factors like expenses and existing EMIs while calculating eligibility. Opt for lenders with lower interest rates and lenient criteria to ensure affordable home loans.

If you're looking for a reliable financial partner for your home loan needs, consider Mahindra Finance. With competitive home loan rates and customer-friendly policies, Mahindra Finance can help you achieve your dream of owning a home. Use the online home loan calculator to determine your eligibility and explore the best options for you.

FAQs

Q: Can I get a home loan with a low salary?

A: Yes, you can still get a home loan with a low salary. Banks consider various factors like expenses and existing EMIs while determining the loan amount. It's advisable to choose lenders with lenient criteria and explore affordable housing options.

Q: What is the maximum home loan tenure available?

A: The maximum home loan tenure offered by most banks is around 30 years. Opting for an extended tenure helps in reducing the EMI amount and makes it easier to manage your finances.

Q: How does my credit score affect my home loan eligibility?

A: Your credit score plays a significant role in determining your home loan eligibility. A higher credit score indicates good financial discipline and increases your chances of getting a higher loan amount at lower interest rates.

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