How Much Housing Loan Can You Afford? Calculate This with A Home Loan Affordability Calculator Easily!
When it is about your home buying journey, you often are bound to be anxious regarding how much you can afford. Other questions that you may have include:
- How much down payment do you require?
- Given your current income, what is your affordable EMI?
- What is the maximum property cost that you can bear?
To put this simply, you can evaluate your home loan eligibility through a home loan affordability calculator. Before using the home loan calculator, ensure to at least once factor in the below parameters for an informed decision.
- Compute your FOIR (fixed obligation to income ratio)
Many lenders usually ensure your EMIs must not surpass 40 percent of your income. Suppose your monthly income is Rs 1 lakh, the lender may lend you only if your loan EMI is not more than Rs 40,000.
And what home loan can you avail for an EMI of Rs 40,000?
Based on distinct loan repayment tenures and assumed home loan interest rate of 7 percent p.a., here are the amounts you can avail under a home loan:
20-year repayment tenure – Rs 51 – 52 lakhs
15-year repayment tenure – Rs 44 – 45 lakhs
However, note that this 40 percent limit as EMI cap might not be applicable for all lenders.
- Down payment requirement
EMI computation is not the only thing you have to worry about. You also must put in 10%-25% of the property cost from your own resources as down payment. Many end-up using a huge chunk of their investments/savings for making this payment. Using the above instance: if your salary is Rs 1 lakh per month and you look to avail a 20-year tenure on loan, the affordable EMI would be Rs 40,000 and the loan proceeds that you would avail is Rs 50 lakh. However, as banks just lend around 75 – 90 percent of the property cost, it is clear you must provide 5 lakhs to 12.50 lakh as down payment from your own pocket.
- Other crucial factors
What if you are purchasing an under-construction land and require paying rent along with the EMI? Here, you must see if you can afford your EMI and rent together. For many, paying EMI and rent means having inadequate or no money left for financial emergencies. This would make it impossible for you to save for your crucial financial goals. While it is manageable and fine in case it is just a temporary occurrence, you cannot sacrifice on your crucial goals if this situation continues for the long term. Thus, ensure to compute your repayment capacity before you apply for a home loan.
Once you have factored in the above 3 parameters, use the online home loan affordability calculator to calculate your eligibility for home loan by providing details like your age, gross monthly income, down payment, repayment tenure, rate of interest and other EMIs.
Purchasing a home is an emotional decision for many. And it is easy to be carried away. However, ensure to get a fair understanding about your finances to see where you exactly stand. Stretching slightly your budget is fine because your income will rise, while the EMI will not. But avoid over boarding. Use a home loan eligibility calculator for an accurate understanding of your affordability.