Then the question that arises here is How will you do its financing? One way that you have is that If you have the full amount in your savings. Then you can withdraw the money from the investment or savings. And can invest in the house.
The second way is that you can withdraw some amount from the savings. And the rest will be paid by the loan And the home loan is a very good way to finance. Because the home loan is cheaper and its interest rates are minimal.
So the maximum amount of loan Is dependent on your salary But there are many different factors On which your home loan eligibility is dependant So what is the formula for a home loan eligibility?
What are the factors on which your loan eligibility is dependent? In this article, we will talk about these things in detail And along with this, I’ll show you a home loan eligibility calculator. I will give you its demo I’ve put options in the calculator.
You’ll know all the things like how much you can take the loan How much is the maximum amount you can spend to buy a house?
How much you’ll pay as principal and interest Over 20 years, 30 years? How much soever you take a loan You’ll know these things from that And in the same series, I will make another video And I will talk about how you can increase your home loan eligibility We will talk about that also.
Home Loan Eligibility Calculation By Bank.
First, we will understand how the home loan eligibility is calculated? What is the exact formula for that But before that, we will understand a logic. That what logic does the bank have Whenever it calculates home loan eligibility. So assume that your income is “I”, let’s say it is 50,000 Rs per month. Then your home loan eligibility is dependent on this.
So the bank says that You will cover 50 % of your expenses with your income And with the rest 50%, you can do savings. Because you will need 50% for your household expenses And the 50% that you are saving, you can deposit in your EMI So you can pay EMI with a maximum of 50% of your monthly income According to that only, your home loan eligibility is calculated
Home Loan Eligibility Calculation Formula.
Now we will its formula The formula for a home loan eligibility is Your monthly fixed income×50% As I have explained to you that this 50% portion You first calculated its 50% Out of that if you are paying another EMI Assume you have your personal loan, car loan Education loan, you are paying EMI for that You will subtract that from this And then the amount will be divided by per lac EMI How is this per lac EMI is calculated?
Generally, if there is a banker Whoever is giving you a home loan. He has an EMI chart, it looks somewhat like this He has that for every year For as many years as you want He has a chart for per lac EMI So that you’ll know how much EMI will you get for a loan of Rs 1 lac Assuming the interest rate as 10.5% So your per lac EMI will be this 5 years, 10 years, 15 years, 20 years, 25, and 30 years.
I have given you the chart This EMI is given in the chart But I have made an EMI calculator for this It is quite detailed I have also made a video about that, you can search it on youtube.
So download the EMI calculator You’ll know the exact EMI For how many years, whatever the loan amount, whatever interest rates You can put all these inputs, you can change them also .
You’ll know the exact EMI you don’t need to approach any banker So now we will see, we will understand by the example .
That what will be the loan eligibility amount if we take the example of 50000 So assume your monthly fixed income is 50000 in hand And then you will multiply it by 5 %. After that, assuming you have another EMI of 10000 Including all the loans.
We will subtract that amount And we will divide it by per lac EMI The per lac EMI will depend on your loan tenure So we will assume that a standard home loan is of 20 years Its per lac EMI is 1000 Rs At the interest rate of 10.5% If we divide it by that, if divide it by 1000.
So the amount that you have is You divided 50,000 by 2 25,000-10,000 (subtraction) Divided by 1000 By our per lac EMI So the amount is 15000 divided by 1000.
The amount we get is 15 lac Rs. You are eligible for a maximum of 15 lacs And you can get a loan for that So in this way, you can calculate EMI for as many loan tenure as you want I am giving you an EMI calculator.
You can calculate your EMI with a calculator I am giving for 1 lac Rs And you already know your fixed income and you know. How much EMI is going on, So you can easily calculate your loan eligibility by yourself And if you don’t want to do it by yourself Then I’ll give you a calculator for that and I’ll show you the demo .You’ll get other details in that How much you can afford, what is the total amount of house that you can afford?
How much will you pay for principal and interest? We’ll get all these things, I will give a demo for that also But before that let’s understand that what are factors on which loan eligibility is dependent? We understood that this is the formula for loan eligibility .
Quantitative Factors Affecting Home Loan Eligibility
We have to understand the other factors too First, we will understand the quantitative factors Quantitative factors are those factors that are dependent on financial numbers. So like your monthly income, as we have seen that loan eligibility is dependent on monthly income. After that, it is dependent on the loan tenure.
So the per lac EMI is dependent on your loan tenure, you are seeing it or not If you take a loan for fewer years, then your EMI will be more. But if your loan period extends if it is 20 years then your EMI decreases Per lac EMI If the per EMI decreases, then your loan eligibility amount increases.
Because your denominator will decrease and your loan eligibility amount will increase Then the third factor is that it depends on the interest rates Like we have taken here 10.5 % Assume if your interest rate decreases to 8.5%.
As the current rate of home, loans is 8.5% So in that case your per lac EMI assuming for 20 years.
So it will decrease to approx 850 Rs So in that case your per lac EMI decreases And your loan eligibility amount will increase The fourth, as we have seen that if your other EMI is going on It also depends on that So if your other EMI is going on Then your loan eligibility amount will decrease naturally And the fifth factor is the loan to value ratio Which is not reflected in this formula I will explain this to you What’s happening, in this case, is that Your loan amount is also dependent on your property value You get the loan at a maximum of 80% on property value.
So assume your property value is 50 lac Rs Then 80% of the property value Then you’ll get a loan for only 40 lac Rs The maximum loan can be 40 lacs only And you have to do a down payment of the rest 10 lac Rs You have to give a down payment amount from your pocket We can call this out-of-pocket expense We can call it, out-of-pocket investment So you have to spend these 10 lac Rs from your pocket And you will get a loan for the rest of 40 lac So on this too, your loan eligibility depends.
Check What’s Your Credit History
So these were all quantitative factors, which are dependent on numbers Now some are qualitative factors What is your age, what is your credit history? So this risk profile is studied.
So we will see all these qualitative factors too. So these are all the qualitative factors like the first is a type of property. So if the property is registrable, then you will get the loan on that very easily.
Like if you have a ready to move property. That can be registered easily Or there is some under-construction property. You’ll get the loan on that easily Now under construction property, you can also construct your house by yourself.
You may have booked a flat of some builder In that case, you’ll get a loan But in an under-construction property, the payment is done stage wise. Whatever the bank, assume your 20% construction is done. Then it will release only a 20 % amount And if its done 50% then they will release 50% But they will release 100% in the case of ready to move property.
There is no need of stage by stage payment Because you are buying immediately. Then the bank will release a 10% payment as soon as you register your sale lead And the second is the properties. That cannot be registered. Assume the property is being sold on general power of attorney. Then you’ll not get the loan on that easily And second, assume if you are buying a plot then you don’t get the loan on that also. And the other factors are there, like what is your age. Assume you are young and you are 25 years old So your working age is quite long, so you can get a maximum loan of 30 years. As you are seeing here, you can take a loan for 30 years. Then your loan eligibility increases Assume if you are 50 years old, then your left working age is 10 years 60 years is considered to be the retirement age . So, in that case, you’ll get a loan for a maximum of 10 years And assume if you get pension after retirement, then the bank can consider it. So in this case, according to your pension, it can increase your loan eligibility.
Then there is a factor called a credit history
You may have heard about the cibil score Cibil score tells us that how was your transaction and payment history.
Whenever you took EMI or loan So you did the payment on time or not So this score is out of 800 If your score is 700 plus then you get a loan very easily. But if your score goes below 700 Assume you did default then your cibil score will be ruined It may be somewhat less. So in that case, how can you increase or improve your cibil score?
What is a CIBIL score?
I’ll make a detailed video about this too. The loan eligibility is often dependent on your credit history If your credit history is too bad, then it is possible that
The loan will not be sanctioned in the first place. This is also possible And another factor is qualifications, assume you have done some professional degrees .
Assume you are B.Tech, MBA, CA, Doctor Then it also depends on that You may get offered better interest rates And your loan can be sanctioned quite easily How’s your work experience? What are your growth prospects?
Loan eligibility depends on that Then how is your professional stability As I said assume you are professional, you are CA or doctor Or you are an architect or you are working in a software industry
Then your stability is considered good But some sectors are considered to be unstable.
Where the jobs are lost easily, the attrition rate is high For example, the BPO industry, according to banks, is considered unstable The loan doesn’t get approved easily Then how is your employer category? How big is your company is?
How stable is that? They are kept in A, B, and C categories So the employers of A categories, the big companies.
They get offered the better interest rates And they get loans very easily So better interest rates mean the employees will get lower interest rates.
Your family background is also checked Assume you are working in the BPO industry But your family background is quite good Your family have professionals Your family owns various assets These things will be checked And the other factor is how is your expense pattern?
Assume as I have said in the example That your salary is 50,000 Rs And you have only two dependents.
Assume one is your wife and the other one is your child So fewer people are dependent on you. And your salary is good So your loan will be approved easily And your loan will be sanctioned on full eligibility amount But assume if your salary is only 20000.
And 4 people are dependent on you So, in that case, you need a little more money to meet your expenses It may be possible if we talk about the 50% then 10000 may not work for you. So in that case, the bank can decrease your eligibility So the bank will consider the EMI of 8000 instead of 10000 And maybe for 20 years, the loan of only 8 lacs get approved.
So I have told you about how the home loan eligibility is calculated On what factors it is dependent? We have seen quantitative factors and qualitative factors.
Now I’ll show you a calculator Which I have made myself It will tell you the exact amount For how much loan are you eligible for? And with that, it will also tell you the amount you can buy the house with And how much will you pay for principal and interest on your loan?
See The Demo For The Home Loan Eligibility Calculation
So let’s see the demo of that loan eligibility calculator So this is the home loan eligibility calculator About which I’ve talked about So here I’ll show you the demo What are all input and output values.
The one’s which are marked with the yellow color is input values You can change them.
And the rest are output values, that you cannot change They are locked These are the input values, I have put the same values as an example.
That we’ve talked about Assume your income is 50000 and your loan tenure is 20 years The interest rate is 10.5 % per annum And the rest of the EMI is 10000 So you can see that it is giving you all the outputs The maximum eligibility of loan amount is 15 lacs You can see it in green color.
You can pay EMI of a maximum of 15000 for a home loan And along with that, it is also showing you in blue color.
The maximum amount with which you can buy the house So for example, in this case, you can buy a house of approx 18,50,000 Rs Our of which you have to arrange 3.5 lacs by yourself .
And you’ll get a loan for 15 lac Rs With that, it also tells you the principle and interest amount You have to pay a total interest of 21 lac Rs in 20 years And you have to pay 15 lacs as the principle So you can also see that you are paying approx 58% interest So your interest amount is quite high in this case .
If you want to decrease your interest amount then you can play around here. If you do it for 10 years, if you can pay early So you’ll see that interest amount decreases suddenly In 10 years, the interest amount is 7 lacs. From 21 lacs to 7 lacs, it means that you are saving straight 14 lacs But your EMI is 15000, so this is happening.
Your loan amount eligibility decreased, Then you can take a maximum loan of 11 lacs Rs only according to your salary So you can see that how much amount of loan you want to take.
Assume you want to take a small property and it will come for 14 lacs only. Then you will save very much in interest You can see in this way and assume you want to purchase big property. So in that case, if you can decrease the rest of the EMI Then try and see by putting 0 amount here.
How much are you eligible for? In this case, you can see that your loan amount has increased Your loan eligibility is 18.5 lacs.Because you can pay 25000 Rs as EMI of home loan And your budget for the house has also increased. You can buy a house of 23 lacs in this case. So you can change all these values According to your salary, You can calculate.
Maximum how much loan can you take? How much can you afford for a house? You’ll get to know every thing with this So in this video, we saw how to calculate home loan eligibility On what factor it is dependent? And with this calculator, in what ways you can put your inputs and calculate your maximum eligibility.
How much will be your EMI? How much maximum can you spend on a house? With this, I’ll also make one more video After this video In which we will talk about.
How can you increase your home loan eligibility? In that, I’ll give you some tips That how can you change your pattern You can change your income You can change your loan tenure What are ways in which you can increase your home loan eligibility?