How much home loan can you afford on your salary?
On ₹1.5 lakh take-home with ₹25 lakh saved, a comfortable home budget is about ₹69 lakh. See the two limits, a loan table by salary, and what moves it.
7 min read
A bank will tell you how much it will lend. That's not the same as how much you can comfortably repay.
Take someone with ₹1,50,000 a month take-home, ₹50,000 of monthly spending and ₹25 L saved. Keeping the EMI at 30% of pay, they can buy a home of about ₹69 L. Banks would lend up to ₹86.4 L on that salary, but savings, not salary, cap the price at ₹81.5 L.
Limit 1: the EMI your salary can carry
Your EMI budget is a share of take-home pay, minus any EMIs you already pay. At 8.5% over 20 years, each ₹1 lakh borrowed costs about ₹868 a month.
| Take-home | EMI at 30% | Loan at 30% | EMI at 40% | Loan at 40% |
|---|---|---|---|---|
| ₹75,000/mo | ₹22,500 | ₹25.9 L | ₹30,000 | ₹34.6 L |
| ₹1,00,000/mo | ₹30,000 | ₹34.6 L | ₹40,000 | ₹46.1 L |
| ₹1,50,000/mo | ₹45,000 | ₹51.9 L | ₹60,000 | ₹69.1 L |
| ₹2,00,000/mo | ₹60,000 | ₹69.1 L | ₹80,000 | ₹92.2 L |
| ₹3,00,000/mo | ₹90,000 | ₹1 Cr | ₹1,20,000 | ₹1.4 Cr |
Limit 2: the cash your savings can cover
Banks can't lend the full price. RBI caps home loans at 90% of the property's value up to ₹30 lakh of loan, 80% up to ₹75 lakh and 75% above that,[1] so you need a down payment of at least 10–25%. On top of that come stamp duty, registration and other costs, about 7% here, all from your own pocket.
And not all your savings should go into the house. Keep 6 months of spending, ₹3 L here, as an emergency reserve.
Figure 1 from the Home budget calculator
Where ₹25 L of savings goes on a ₹69 L home
- Emergency reserve₹3 L
- Down payment₹17.17 L
- Stamp duty and costs₹4.83 L
How to read it
- 1₹3 L stays aside for emergencies. The down payment takes ₹17.2 L and stamp duty and costs ₹4.8 L, so the bank lends ₹51.9 L.
Putting both limits together
Figure 2 from the Home budget calculator
On ₹1,50,000 take-home and ₹25 L saved: the most you can pay for a home
- ① Comfortable: EMI up to 30% of payRecommended₹69 L
₹51.9 L loan, ₹45,000 EMI · set by your pay
- ② A stretch: EMI up to 40% of pay₹81.5 L
₹65.2 L loan, ₹56,569 EMI · set by your savings
- ③ Bank's limit: EMI up to 50% of pay₹81.5 L
₹65.2 L loan, ₹56,569 EMI · set by your savings
How to read it
- 1At 30% of pay, the EMI sets the limit: ₹69 L, with ₹55,000 a month still free for saving.
- 2At 40%, the pay could carry more, but savings run out first, at ₹81.5 L.
- 3The bank's limit buys nothing more here: the down payment is the constraint.
What moves your budget
Figure 3 from the Home budget calculator
The comfortable price when one thing changes
- As aboveStarting point₹69 L
- Rate 1 point higher₹65.7 L
−₹3.3 L
- 30-year loan₹75.3 L
+₹6.2 L
- A ₹15K car EMI₹52 L
−₹17 L
How to read it
- 1An existing car EMI of ₹15K costs more home budget than a 1-point rate rise. Clear small loans before you apply.
- A longer tenure raises the budget to ₹75.3 L, but you pay interest for 10 more years.
- A higher rate cuts it to ₹65.7 L. Rates move, so leave room for a rise on a floating-rate loan.
- Other EMIs count against the same 30%: a ₹15K car loan cuts the budget to ₹52 L.
Enter your take-home, spending and savings. See the price at each EMI level, and test a home you're looking at.
Before you sign
- Compare with renting. In many Indian cities rent costs far less than the EMI on the same flat: see rent or buy a house in India.
- Plan to prepay if you can. Reducing tenure after a prepayment saves the most interest.
- Insure the loan. If others depend on your income, a term cover at least the size of the loan keeps the home in the family.
What this doesn't mean
- These are limits, not targets. Buying below your comfortable price leaves more for retirement and other goals.
- Bank approval varies. Lenders look at your credit score, age, job and the property, and may approve more or less.
- Rules are as of writing. Check the bank's current LTV and charges before you commit.
Take-home after tax; EMI at 8.5% over 20 years; 7% buying costs; 6 months of spending kept aside. For illustration only, not financial advice.
Sources
- [1]Home buyers can now get more loan for property up to ₹30 lakh (RBI loan-to-value bands: 90%, 80%, 75%) (opens in a new tab)Business Standard · Oct 2015