Did you know that your monthly salary directly impacts your housing loan eligibility? Primarily, it reflects your ability to bear the cost of borrowing. As a rule of thumb, lenders usually offer a home loan amount which is 60 times your monthly salary.
Besides, your monthly salary also impacts factors such as –
- Home Loan Interest Rates – Interest rates depend on your credit profile. For a higher salary, the interest rate levied on a home loan is lower. Many lenders offer concessional home loan interest rates to salaried individuals, as the lending risk is lower.
- Loan Tenure – For most borrowers, the home loan tenure does not exceed retirement age. However, if your salary shows recent increment or better prospects, you may receive a longer tenure, thus reducing your EMI obligations.
- Debt-to-Income Ratio – Any hike in your monthly salary decreases your debt-to-income ratio. And consequently, your housing loan eligibility increases. This allows you to obtain a higher loan amount quickly.
- Processing Time – For salaried individuals, the time taken to process a home loan by the lender is generally lower as compared to self-employed individuals. Nonetheless, you can prepare income proof documents such as payslips, ITRs, etc. well in advance to avoid any delays.
How Do Lenders Evaluate Your Monthly Salary?
For salaried individuals, lenders do not consider in-hand salary to determine the home loan amount. They consider the net monthly income by deducing monetary incentives from your in-hand salary. Usually, monetary incentives like medical, house rent, or leave travel are not considered in your net income evaluation since they are provided for specific expenses.
Once your net monthly income is deduced, lenders can demand the following documents as proof of income-
- Payslips of last six months
- Bank statements
- Form 16 of the past two years
- Certificate indicating TDS
- PAN card for identity proof
- Details of an existing loan, if any
If your monthly salary evaluation goes well, your home loan application can quickly receive approval from the lender.
Use a Home Loan Calculator Before Applying for Home Loan
Do you want to know how much loan amount you are eligible for? If so, then use a home loan calculator online. A home loan calculator equates your monthly EMI payments using three factors – loan amount, tenure, and home loan interest rates.
You can get a more accurate estimation of your EMI obligations before applying for a home loan with the help of this tool. Therefore, instead of performing erroneous manual calculations, you can rely on accurate figures provided by a home loan emi calculator.
Over to You
“How much home loan can I get on my salary?” is a recurring concern among first-time borrowers. Before applying for a home loan in India, use a home loan eligibility calculator or consult with your friends and family members to help answer this question.