How to know the eligibility of home loan?

Most of the people don’t have the idea that how much loan they are eligible for? Here we have discussed few things related to home loan which can help you in knowing how much home loan you can take.

First one is eligibility criteria. To decide the amount of home loan two important factors are taken into consideration – income and repayment capacity. The other factors include qualification, age, dependants, assets, liabilities, credit report, savings and the stability and consistency of your occupation also matter. The bank can also calculate the loan amount taking a specific percentage of the cost of the property.

Second is repayment capacity. Banks calculate repayment capacity on the bases of your income and expenditure pattern. It is assumed that you need around 40% of your income as living expenses. For example if you are earning Rs60,000 per month and out of this you are spending Rs25,000 as living expenses and Rs20,000 on heads, such as a car loan, then your eligibility will be calculated on the remaining Rs 15,000.

Then, is the formula to calculate the eligibility.

Home loan eligibility=monthly savings/equated monthly installment (EMI) per lakh x 1 lakh. For a home loan of Rs1 lakh taken for 20 years at 10% interest rate, the EMI would be around Rs965. Thus, in this case the eligibility will be 15,000/965 x 1 lakh, or Rs15.54 lakh.

You can increase the home loan amount. You take joint home loan with your spouse, children, parents or siblings to increase your eligibility. Try to get the longer tenure of loan, this increases the eligibility.