How much of a home loan can I get on a 40000 salary?

Over the years, the lending institutions in India, including banks and NBFCs (non-banking financial companies), have significantly simplified their home loan process and document requirements to boost the demand for such loans. With the lenders offering 100% digital services, the loan disbursement process has become shorter and hassle-free for the borrowers.

However, lenders still follow strict scrutiny to avoid lending money to high-risk customers. So, if you are considering applying for a home loan, your eligibility will mainly depend on your income, amongst other things. Your salary reflects your financial condition and repayment capacity. All lenders require you to have a certain minimum salary for a home loan.

So, if you are wondering how much loan can I get, then this blog is just for you as we deep dive into the details.

 

How does salary affect your home loan eligibility?

Buying a home requires a huge amount of capital. And when the financial companies give you the loan they bear a risk. So, before they sanction your loan application, they determine your eligibility based on your salary or income.

However, income is not the only factor that lenders consider while approving your home loan. They also take into account other critical factors like your credit score and how well you manage your debts and income. So, depending on the monthly salary you earn, you must decide how much loan you should take.

 

How do lenders decide how much loan you can get based on your salary?

Let’s say, you earn a monthly income of Rs. 40,000, and want to take a home loan, you may ask the lender how much loan can I get on Rs. 40,000 salary? Well, most lenders may say we use the EMI/NMI ratio or the multiplier method to determine how much loan you can get on your salary.

In the EMI/NMI method, the lender considers the EMI (equated monthly instalment) on the home loan and your NMI (net monthly income), and based on the calculated ration, they decide the maximum home loan amount you can borrow.

If your EMI/NMI ratio is 60% you can get the home loan. However, based on the exact percentage, the lender may increase or decrease the interest rate. The lower the ratio, the better your chances of getting a higher home loan at an affordable interest rate.

In contrast, if the lending organisation uses the multiplier method to calculate the home loan for Rs. 40,000 salary, they will multiply your NMI by a factor between 60 and 72 or the annual income multiplied by a factor of 5-6. Let us understand this with an example:

If your monthly salary is Rs. 40,000, and you are not sure how much home loan you can get on the salary, here is how you can do the calculation

Rs. 40,000 x 72 = 28,80,000

So, the maximum home loan you can get on your monthly salary of Rs. 40,000 is Rs. 28.8 Lakh. You can get a higher amount if you apply for a home loan jointly with any of your family members who has a steady income and are co-financing the property.

Tips to increase your home loan eligibility

• Do your research well about the different lenders in the market, and choose one that is offering the loan at the best interest rate. You can take advantage of the festive deals or the special offers.
• If you wish to buy a home at selected locations or specific properties that are pre-approved by the lender, you may get the home loan at a lower interest rate. Also, the approval process would be much easier and faster, as the lender would have already inspected the property.
• If you have any additional funds, you can use those funds to pay a higher down payment than the minimum amount required. This way, you can borrow less, and you may get the loan at a discounted interest rate. Also, if you have surplus funds, you can use it to prepay the principal amount in part or full. This will reduce your EMIs for the remaining tenure.

 

Conclusion

The lending institutions consider your monthly income as one of the most critical factors to determine your home loan eligibility. However, when you apply for a home loan, go with a reputed lender like India shelter who offers the loan at competitive interest rate, has simple eligibility requirements and gives you repayment flexibility.