Investing in a real estate requires a huge sum of money, and for most people in India buying a home without availing a loan is unaffordable. While many financial institutions in India offer home loans, you must meet their eligibility requirements to get approval.
One major consideration when applying for a home loan is your income. Apart from making you eligible for a home loan, your income also plays an important part in determining the maximum amount you qualify for. If your monthly salary is Rs. 40,000, how much home loan you will be eligible to borrow? Let us have a look-
Understanding Your Salary
For a salaried employee, the lenders consider the net salary. Salaries in India generally have several components like Basic Salary, House Rent Allowance (HRA), Leave Travel Allowance (LTA), Conveyance Allowance, Medical Allowance, and more.
In most cases, lenders do not consider LTA and medical allowance of the loan applicants while calculating their salary. So, if your salary is Rs. 40,000, the lender will deduct LTA and medical allowance (if any) for calculating your actual monthly income. If you do have these components in your salary slip, the lender will consider your income as Rs. 36,000-Rs.37,000 and the lender will calculate the loan amount on the same.
How Much is a Salaried Professional Generally Allowed to Borrow?
In most cases, salaried employees are eligible for home loans of up to 60 times their net monthly salary. So, if your net monthly salary is Rs. 40,000, your maximum home loan eligibility will be Rs. 24 lakhs.
If you have LTA and medical allowance in your salary and the net income falls to around Rs. 36,000, you will be eligible for a home loan of up to Rs. 22 lakhs. But apart from your income, lenders consider a host of other factors to decide your maximum loan amount.
Factors that Impact Home Loan Amount Eligibility
Some of the most important ones are-
While home loans are available for eligible applicants between 18 and 70 years, lenders generally prefer younger applicants. This is because younger applicants have longer working lives, and the chances of them repaying the loan on time are high. So, if you are in your 50s or 60s, the loan amount can be lower.
- Employer and Work Experience
Lenders generally prefer people who are working at reputed companies as the professional future of such applicants are considered to be more secure. This again increases the chances of timely repayment. Similarly, if you have decent work experience, this too can work in your favour and make you eligible for a higher loan amount.
- Credit Score
Last but not least is your CIBIL or credit score. While you may have an impressive monthly salary, a poor credit score can still negatively impact your home loan eligibility. In fact, the lender can reject your loan application if you do not meet the credit score requirement. Most lenders generally prefer applicants with a CIBIL score of at least 650 and above.
Similarly, if your CIBIL score is around 750 or higher, you might be eligible for a low interest home loan and a higher loan amount.
Applying for a Home Loan
It is essential to have a clear idea of the amount you are eligible for before applying for a home loan. This will also make it easier for you to select a property as you will know your budget beforehand.
There are now also online home loan eligibility calculators available that help you know the eligible loan amount quickly and easily. You can use one such calculator to know the exact amount you qualify for based on your salary and other eligibility factors.