How Much Home Loan Can You Actually Afford?
Most people decide how much home loan to take by looking at the house they want. Banks do the opposite — they start from your income. Understanding their formula tells you your realistic budget before you fall in love with a flat you cannot finance.
The FOIR rule banks use
Lenders cap your total EMIs at a share of your monthly income — the Fixed Obligation to Income Ratio (FOIR), usually 40–50%. If you earn ₹1 lakh a month and the bank uses 40%, your total EMIs (including any existing loans) cannot exceed ₹40,000. Whatever loan that EMI can service is your eligibility.
What each salary can borrow
Assuming a 40% FOIR, a 9% interest rate, a 20-year tenure, and no existing EMIs, here is the approximate home loan different salaries support:
| Monthly income | EMI capacity (40%) | Approx. loan |
|---|---|---|
| ₹50,000 | ₹20,000 | ₹22.2 lakh |
| ₹75,000 | ₹30,000 | ₹33.3 lakh |
| ₹1,00,000 | ₹40,000 | ₹44.4 lakh |
| ₹1,50,000 | ₹60,000 | ₹66.7 lakh |
| ₹2,00,000 | ₹80,000 | ₹88.9 lakh |
Add the down payment (banks fund up to 75–90% of the property value) and this sets your true budget. Check your own figure with the loan eligibility calculator.
Why you should borrow less than the maximum
Qualifying for a ₹44 lakh loan does not mean you should take it. At 9% for 20 years, a ₹44 lakh loan means an EMI of about ₹40,000 and roughly ₹51 lakh paid in interest over the tenure — more than the loan itself. A 40% FOIR also leaves little room for the real costs of owning a home: maintenance, property tax, and life's surprises.
A safer target is to keep your home-loan EMI under 30% of take-home pay, not 40% of gross. Use the EMI calculator to see the total interest at different loan amounts — seeing the interest number in full often changes how much people choose to borrow.
How to increase your eligibility (sensibly)
- Clear existing EMIs — every ₹5,000 of existing EMI directly reduces your home-loan capacity.
- Add a co-applicant — a spouse's income is added to yours, raising the eligible amount (and both get tax benefits in the old regime).
- Choose a longer tenure — it lowers the EMI and raises eligibility, but sharply increases total interest, so use with care.
- Improve your credit score — a score above 750 often earns a lower rate, which both cuts your EMI and raises how much you can borrow.
Figures are indicative; actual sanction depends on the lender's FOIR policy, your credit profile, property value and employment. This is general information, not financial advice.