“How much home loan am I eligible for on my salary?” is usually the first question that comes to a salaried person’s mind when they plan to buy a house. A loan for purchasing a home for salaried professionals depends on several factors such as monthly income, age, credit history, type of property, savings, etc.
Before availing housing finance, remember that your home loan EMI should ideally not be above 45-50% of your net take-home salary, as that can cause significant financial strain in day-to-day life.
- If your monthly salary is Rs, 35,000 and you have decided to take a home loan, then you shouldn’t be paying more than Rs. 17,500 as your home loan EMI.
- If you are taking a home loan for 35,000 salary, you can get a maximum loan amount of Rs. 20,16,481 at say an 8.5% interest rate for a tenure of 20 years. In this situation, the home loan EMI amount you would pay is not more than Rs. 17,500.
For a home loan, most financial lenders offer a maximum tenure of 30 years. Therefore,
- If you want to opt for a 30-year long tenure on home loan with a salary of Rs. 35,000, you can borrow a maximum amount of Rs. 22,75,860 at say an 8.5% interest rate, with a home loan EMI being not more than Rs. 17,500.
Short Tenure or Long Tenure: Which One Should You Opt For?
In a nutshell, a longer tenure enhances your eligibility as the home loan EMI goes down. However, a longer tenure also means that you will be paying more interest by the end of your loan duration. This is because a longer tenure increases the cost of borrowing. In contrast, if you choose a shorter tenure of 10 years, you will be eligible for a lower loan amount and will pay lesser compound interest.
However, when buying a home for salaried professionals, longer tenure is necessary if their income is low. Why? With a short tenure of 10 or 15 years, they might be unable to borrow enough money to cover the cost of their dream property.
Ultimately, choosing a longer or shorter home loan tenure should be based on your affordability as well as the loan amount you require.
The Role of a Home Loan EMI Calculator
A home loan EMI calculator is an online tool that allows you to calculate your monthly EMIs correctly. Having a clear idea of your EMI will enable you to decide the right home loan tenure along with the maximum eligible loan amount. Once you are aware of this, you can choose shorter loan tenure and quickly pay off your loan if you can afford to pay higher EMIs. If not, you can extend your loan tenure to what you are comfortable with.