How much home loan can I get on my salary?
Banks typically allow 40-65% of your net monthly income towards all EMIs (called FOIR). For example, if your salary is ₹50,000 and FOIR is 50%, your total EMI capacity is ₹25,000. After deducting existing EMIs, the remaining capacity determines your maximum loan amount based on interest rate and tenure. A person earning ₹50,000/month can generally get a home loan of ₹25-35 Lakh depending on interest rate and tenure chosen.
What is FOIR in loan eligibility?
FOIR stands for Fixed Obligation to Income Ratio. It is the percentage of your monthly income that banks allow to go towards all EMI payments including the new loan. Most banks keep FOIR between 40% to 65% depending on your income level and credit profile. Higher income earners may get a higher FOIR since their essential living expenses are a smaller portion of income.
How do banks calculate loan eligibility?
Banks calculate loan eligibility in these steps: (1) Determine total EMI capacity = Net Monthly Income x FOIR%. (2) Calculate available EMI = Total EMI capacity - Existing EMI obligations. (3) Use the reverse EMI formula to find maximum loan principal that can be serviced with the available EMI at the applicable interest rate and chosen tenure. Banks may also consider factors like age, retirement age, employment stability, and credit score.
Does existing EMI affect new loan eligibility?
Yes, existing EMIs directly reduce your new loan eligibility. Banks deduct all your current EMI obligations (personal loans, car loans, credit card minimum dues, etc.) from your total EMI capacity before calculating the maximum new loan amount. For example, if your EMI capacity is ₹25,000 but you have existing EMIs of ₹10,000, only ₹15,000 is available for the new loan EMI. Closing existing loans before applying can significantly increase your eligibility.
How to increase home loan eligibility?
You can increase your home loan eligibility by: (1) Adding a co-applicant like spouse or parent to combine incomes. (2) Closing or prepaying existing loans to free up EMI capacity. (3) Choosing a longer loan tenure (25-30 years) to reduce monthly EMI requirement. (4) Improving your CIBIL score above 750 for better terms. (5) Showing additional income sources with documentation. (6) Opting for a bank offering lower interest rates or step-up EMI plans.