Home loan eligibility is primarily determined by your repayment capacity, which banks assess based on your income, existing financial obligations and credit history. The higher your disposable income, the more likely you are to be eligible for a larger loan amount.
Banks typically consider a percentage of your net monthly income (usually 40-60%) as your maximum permissible EMI, also known as the FOIR (Fixed Obligation to Income Ratio). Our calculator uses this principle to estimate your eligible loan amount.
The formula for EMI is:
$$EMI = P \times \frac{R \times (1+R)^N}{(1+R)^N-1}$$
To find the Principal (P), which is the eligible loan amount, we reverse the EMI calculation based on your eligible EMI (derived from your income) and the chosen interest rate and tenure.
Monthly Income: Your total take-home salary or business income per month.
Existing EMIs: Any ongoing EMIs for other loans (personal, car, etc.) that reduce your disposable income.
Interest Rate: The expected annual interest rate for the home loan.
Loan Tenure: The number of years/months you wish to repay the loan. A longer tenure generally increases eligibility but also total interest paid.
Frequently Asked Questions (FAQs)
1. What is home loan eligibility?
Home loan eligibility refers to the maximum loan amount a bank or financial institution is willing to lend you for purchasing a home. It's determined by various factors, primarily your ability to repay the loan based on your income and existing financial commitments.
2. How is my income considered for eligibility?
Your net monthly income is a crucial factor. Banks calculate a 'Fixed Obligation to Income Ratio' (FOIR), which is the percentage of your income that can go towards all your loan EMIs (including the new home loan). Typically, this ratio is between 40-60%.
3. Do existing loans affect my home loan eligibility?
Yes, existing EMIs from other loans (car loan, personal loan, credit card outstanding) reduce your net disposable income. This, in turn, lowers your repayment capacity and the maximum home loan amount you are eligible for.
4. How does loan tenure impact eligibility?
A longer loan tenure generally increases your home loan eligibility because it spreads the repayment over more months, leading to lower monthly EMIs. However, a longer tenure also means you pay significantly more interest over the life of the loan.
5. Is this calculator's result a guarantee of eligibility?
No, this calculator provides an estimate based on common banking principles. Actual eligibility also depends on your credit score, employer's reputation, age, property value and the bank's specific internal policies. It's best to consult with a bank for a precise assessment.
