Once you know the eligibility amount then the clear picture will emerge so that you will know if you have sufficient money for down payment. Normally the down payment will be in the range of 10%-20% of agreement value of the property. Apart from that you will also have to arrange for yourself stamp duty and registration charges, as the banks no longer fund these charges.

Your loan amount eligibility is determined by several factors like your occupation (whether you are salaried/ self-employed), your disposable income, the interest rate charged by the bank and the tenure of the loan.

The rate of interest is largely dependent on your credit history and does not only influences the Emi amount but also the loan amount eligibility. Normally lenders consider certain percentage of your net monthly salary as available for paying Emi’s on all your loans. Hence, higher the Emi lower the loan eligibility amount and vice-versa.

You can increase your loan eligibility by including earning spouse, parents or children as co-applicant and co-borrowers to the housing loan. You can alternatively increase your eligibility by increasing the tenure of the housing loan.

Let’s see how it all works:

Lenders assess certain portion of your income as available for payment of EMI of your loans. Though there are no standard norms as it varies from bank to bank. But lenders do take into account factors like expense and investment pattern, credit card dues, etc. But normally the lenders will assume that around 40%-45% of individual’s net salary is available for payment of EMI to serve all the loans. The figure can be higher if you are in a high-income bracket.

Illustration:

Mr. Verma wants to taking a loan for first time for purchasing a residential property. His net monthly salary is Rs. 1,00,000/-. Assuming that he has fulfilled all other criteria and the bank has considered 40% of his net income as available for payment of EMI, hence he will have Rs. 40,000 p.m. for payment of home loan EMI.

Assuming current rate of interest of the bank is 10.15% p.a. for 20 years tenure. Hence, Mr. Verma will be eligible for Rs. 41.03 lakhs at an EMI of Rs. 975 per lakh. Now let’s assume the interest rate has fallen by 0.50% to 9.65% pa with a resultant drop in EMI from Rs. 975 to Rs. 942 per lakh. With the reduction in EMI, the eligibility of Mr. Verma has gone up by Rs. 1.44 lakhs for a 20 years loan. Similarly if the rate of interest goes up by 0.50% i.e. from 10.15% to 10.65% pa, the Emi per lakh increases to Rs. 1008, which will reduce his loan eligibility by Rs. 1.34 lakhs.

Note: All calculators and comparators are made based on certain assumptions, which may not be true in your case. You should consult your personal financial advisor before taking any decision. Apnapaisa disclaims any responsibility for any decision taken based on these calculators and comparators.