How much home loan can I get on my salary?

 “How much home loan can I get on my salary?“ If you are a salaried employee and you plan to own a house, this is the first question that pops up in your mind. This article will explain to you what part of your salary is considered while calculating eligibility, what are the common salary slabs & their eligibility amounts, what are the other factors affecting your eligibility and finally how easy it is to apply for a home loan.

Buying one’s own house is a major step for many people in achieving a sense of settledness. This is especially a status thing in Indian culture. However, for the majority of the salaried population, real estate prices are beyond their reach. Only after diligently building their savings can they finally make this dream a reality, often later in life. This is where availing of a home loan can catapult oneself to achieve their homeownership dream at an early age. 

Understand your salary:

Quoting salaries can involve using figures representing either gross or net (in-hand) salary. Thus, it is important to understand the difference between gross and net salary. This is because financial institutes often consider the net component of one’s salary while arriving at their home loan eligibility. Salary structure differs across various organizations. However, it is broadly divided into the following components:

1. Basic Salary
2. Allowances Like Medical Allowance, Leave Travel Allowance (LTA), House Rent Allowance (HRA), Other Allowances, etc.

The above components form the gross part of the salary. However, this is not the final amount that the employee takes home. There are some mandatory deductions from the gross total. These are deductions for the Employee Provident Fund (EPF), Tax Deduction at Source (TDS), Professional Tax, etc. The deductions completed, the remaining amount constitutes the net salary, which employees can call their in-hand pay or salary. Home loan eligibility calculation considers an applicant’s net salary alongside other factors.

How Much Home Loan Can I Get on My Salary?

As a rule of thumb, salaried individuals are eligible to get home loans approximately up to 60 times their net monthly income. So, if your net monthly salary is ₹40,000, you can get a home loan up to approximately ₹24 lakh. Likewise, if you earn ₹35,000 per month, you can get approximately up to ₹21 lakh. An accurate way of arriving at eligibility is by using a home loan eligibility calculator which takes into consideration various other factors apart from net monthly income. For a quick reference, we have listed down common net monthly income slabs and their corresponding amount eligibility. These values have been calculated by using the HomeFirst Home Loan Eligibility calculator assuming the following conditions:

Rate of Interest: 10% per annum

Tenure: 20 years

Existing EMIs: None

Number of Household Members: 3

Note: If there is more than 1 earning member in a household, the net monthly income of all earning members can be combined to arrive at a higher home loan eligibility amount.