How to decide your Home Loan EMI basis your income?

Buying a home is probably one of the most expensive purchases made by most of us. When you decide to buy a house, you need to plan your finances in a manner that can help you manage the pre and post-purchase expenses too. If you are planning to avail of a home loan to buy the house, then the amount of loan you can get will depend on the price of the property and your loan repayment capacity. In this article, we will talk about factors that you should consider while deciding the home loan EMI amount based on your income.

Choosing your home loan EMI based on your income

Your income is an important aspect in determining the home loan amount and EMI. Usually, banks cap the EMI to 40% of the gross monthly income of the applicant. This automatically restricts the home loan amount and EMI. Here are some examples to help you understand:

Example 1:

Ravi decides to buy a house worth Rs.50 lakhs. His gross monthly income is Rs.1 lakh. The bank is offering home loans at an EMI of Rs.1000 per lakh for a home loan for 20 years.

So, considering that the bank caps the home loan EMI at 40% of the gross income, the maximum home loan EMI that Ravi will be required to pay will be Rs.40,000. This translates into a home loan of Rs.40 lakhs – which is 80% of the price of the house. If the bank offers a home loan of up to 70% of the price of the house, then the maximum home loan that he can get will be Rs.35 lakhs.

Example 2:

Ravi decides to buy a house worth Rs.50 lakhs. His gross monthly income is Rs.50,000. The bank is offering home loans at an EMI of Rs.1000 per lakh for a home loan for 20 years.

So, considering that the bank caps the home loan EMI at 40% of the gross income, the maximum home loan EMI that Ravi will be required to pay will be Rs.20,000. This translates into a home loan of Rs.20 lakhs – which is only 40% of the price of the house. Even if the bank offers a home loan of up to 90% of the price of the house, Ravi will not be able to get a home loan of more than Rs.20 lakhs.

Example 3:

Ravi decides to buy a house worth Rs.50 lakhs. His gross monthly income is Rs.2 lakhs. The bank is offering home loans at an EMI of Rs.1000 per lakh for a home loan for 20 years.

So, considering that the bank caps the home loan EMI at 40% of the gross income, the maximum home loan EMI that Ravi will be required to pay will be Rs.80,000. This translates into a home loan of Rs.80 lakhs – which is more than the price of the house. Let’s say that the bank offers home loans for up to 80% of the price of the house. Therefore, Ravi can borrow up to Rs.40 lakhs as a home loan. This is where he can choose the loan amount based on the EMI he is willing to pay.

Factors to consider while choosing the home loan EMI

Here are some factors that you can consider while deciding on the EMI of your home loan:

Monthly expenses: When you are calculating your home loan EMI, make sure that you think about the expenses that you might have to manage in the future like medical expenses, education expenses of your children, etc. Also, make sure that you consider inflation while calculating these expenses.

Fixed and floating interest rates: Home loans are usually available with fixed and floating interest rates. Make sure that you consider the implications of both before deciding.

Existing loans: If you have existing loans like car loans, personal loans, or credit card outstanding dues, then make sure that you factor in the repayment of these loans while choosing the home loan EMI.

Remember, a home loan is a long-term commitment. While your income might increase with time, so will the expenses. Therefore, make sure that you do not overstretch your limits while calculating the maximum home loan EMI that you want to agree on.

Also, while choosing a house, try to look for high-quality construction, good connectivity to important parts of the city, and amenities as it can contribute to the growth in the value of your property over time. In Pune, Sankla Buildcoon understands the needs of home-buyers and offers affordable homes with top-notch construction quality at locations that are central and well-connected. Their residential properties include SATYAM NIRANJANI at Hadapsar, SOMMET at Bhugaon, and AVANI at Mohammadwadi.

Choose the right house and the perfect home loan EMI based on your income and realize your dream of owning a home. Good Luck!