People spend years to live a comfortable life. They toil hard in 9-5 jobs to get a stable income and fulfil their life goals. However, despite all that, sometimes it becomes impossible to have enough savings to buy a house. After all, investing in a house property requires lakhs of money, which not everyone can afford. Thankfully, home loans exist.
Home loans are an easy way to finance your dream home through easy instalments. Through home loans, you can buy your dream home and repay it through flexible tenures in easy EMIs. When you avail a home loan, lenders allow you to opt for a comfortable tenure, which is at par with your salary. In short, home loans help you buy your own house without exhausting all your savings.
If you have ever thought of availing a home loan, you might have wondered about the amount of loan you can avail with your salary. Your salary is an essential factor that determines your home loan eligibility. Lenders ask for your income proof to determine your eligibility and to calculate the maximum loan amount you can avail.
How Much Home Loan Can You Get On Your Salary?
It is important to know what components of your salary are considered when determining your eligibility. Your gross salary includes basic salary, allowances like medical and travel allowance, house rent and other incentives. However, lenders consider your net salary to determine your loan amount. Net salary is calculated after deducting income tax, provident fund, TDS etc., from your gross salary.
For example, your gross salary is Rs 50,000 (inclusive of basic salary and allowances), but the salary that you get in hand or your net salary is Rs 44,000 (after deducting TDS, PPF, EPF, Insurance, etc.). The lender would consider Rs 44,000 as your salary to determine the loan amount.
As per the thumb rule followed by lenders, you can get a loan of up to 60 times of your net salary. Therefore, if your salary is Rs 44,000 (according to the above example) you can get a loan amount of up to Rs 26,40,000.
Additionally, lenders also consider other factors while approving the loan amount. For example, your credit score and debt to income ratio is an integral part of home loan eligibility. Lenders consider your debt to income ratio to find out how much debt you are currently servicing. It is preferable that after adding the home loan, your total monthly EMI should not exceed 50% of your monthly income. Therefore, if you have existing debts, lenders can reduce your approved loan amount and in some cases reject your loan application.
Your salary is an important determinant to decide the maximum loan amount you can avail. But other factors are also taken into consideration by the lender. Even if you have a high salary, existing debts and bad credit history can lower your maximum loan amount. Therefore, research the various aspects such as repayment tenure, interest rate, processing fees, etc., before applying for a home loan.