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It is important to assess how much home loan you are eligible for before you start the application process. Understanding this will help you manage your finances and ensure that you are able to pay your EMIs on time without putting a strain on your budget.
You can easily check your home loan affordability through free online home loan affordability calculators on the websites of leading and reputed banks. Most of these calculators have sliders or boxes for different factors that affect your home loan affordability. These categories may include age, down payment, gross monthly income, tenure, interest rate, other EMIs, etc.
Here is an example:For a 30-year-old individual who has a net adjusted monthly income of Rs.50,000, with other EMIs of Rs.5,000, making a down payment of Rs.1 lakh, if the rate of interest is 8% p.a. and loan tenure is 30 years, the loan amount that is computed as affordable is Rs.9 lakh.
The advantage of using home loan affordability calculators is that you can narrow down your search on properties that fit into your budget. You can also organise your finances better when you know how much down payment you will have to make and how much you will have to pay as Equated Monthly Instalments (EMIs).
Home loan affordability is influenced by a variety of factors such as those given below:
This will depend on the discretion of the bank, but it is safer to improve your credit score and then apply for the home loan.
It would be safe to put aside 45% to 50% of your total income exclusively for EMIs.
The best way to reduce your EMIs is by prepaying the loan as much as possible whenever you get a lump-sum amount, such as through bonuses, inheritance, surplus funds, etc.
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