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Author: admin | Category: Loan Car Calculator | Date: 30.05.2014

Manish Chauhan 51 CommentsToday you are going to learn how much home loan amount you are eligible for.
There are several other kind of loans like Personal loans, Car Loan, Education loans – but out of all the loans, home loan is the biggest ticket size loan and takes longer to pay off. I have recorded a full video on this topic which you can view below or on this direct link on youtube. So the bank will assume that the savings per month is 50% of Rs 80,000 , which is Rs 40,000.
Now bank will do the reverse calculation and find out how much EMI is required to pay off Rs 1 lac loan using the standard interest rate and tenure.
Now they find out how much loan Ajay can handle if he can pay Rs 32,000 EMI per month , considering Rs 998 is required to pay Rs 1 lac loan. Assume that Ajay had an existing personal loan for which he was paying Rs 10,000 EMI per month. Important Note – It depends on the bank on how much % saving they assume a person does. Now lets look a little deeper into some of the core factors which affect your loan eligibility. The amount of loan you are eligible for depends directly on your income.This is one single factor which impacts your home loan eligibility to the greatest extent. A person earning Rs 1 lacs has higher chances of affording Rs 30,000 EMI , compared to a person who earns just Rs 40,000 . Now if you are salaried employee, your income is assumed to be more stable than a person who is self employed or into a business.
A lot of banks do not consider the LTA , HRA and medical allowances you get from the company, so they will deduct those amounts from your yearly take home. For a self Employed Professionals, along with the ITR’s for past 3 yrs, banks also require Profit and loss statement along with Balance sheet certified by a CA for last 3 yrs. So if a person is into jobs which are well paying and which are considered stable like Software Engineers, Banking jobs etc (which are white collar jobs), then the person is eligible for a higher loan amount. A lot of banks (especially PSU and cooperative banks) still look at your past relationship very seriously. Almost all the banks categorize various big companies into A,B,C category and offer different interest rates to their employees.
So you understood how the loan eligibility is calculated and some factors which impact it, so now lets see some of the actions you can take to increase your loan eligibility.
If you have any existing loan which is about to complete, then better pay it off completely.
But right now your bank will see that you just have Rs 25,000 in hand to afford additional EMI , and you will have a loan eligibility of only Rs 25-30 lacs, where as in reality you know personally that you can afford much more EMI given a chance.
So in this case, its always a better idea to arrange for money from somewhere else and pay off the personal loan fully and that will free your EMI there, and you will be left with full Rs 40,000 in your hand.
For example, imagine you have another home loan for which your tenure left is 4 yrs and your EMI is 15,000 . You should also mention to the banks if you get additional bonus or perks from your employer or if you have any other source of income like rental income, interest from deposits or some other business income apart from your regular income. When I applied for the loan , the bank responded that per RBI rules , since I have two houses in my name I can not apply for a home loan to construct the third house. Could you let me know if the actual interest paid on the housing loan (Home Invest) is allowed as deduction while filing the return? Dear Manish, Can i add my father’s pension amount as source of income to improve my eligibility? I work as an artical assestent at a chartered firm for 3 years and i am receiving stipend(salary) of Rs. In this blog post we are going to discuss three important parameters namely – Fixed Obligation to Income Ratio (FOIR), Loan to Value Ratio (LTV) and Installment Income Ratio (IIR), which are instrumental for deciding the home loan eligibility amount as calculated by different banks and financial institutions. Banks and financial institutions help individuals fulfill their dreams of owning a home by extending loans and mortgages. For this purpose the first thing which every lender tries to ascertain is the loan eligibility amount for which you qualify depending upon your credit profile.
Although every bank has its own policy and the standard for reviewing a loan application, but following is the list of the general criteria, used by almost all banks and financial institutions while reviewing a loan application.


This is not an exhaustive list and the bank may ask for any particular information depending upon your current situation and details given in the loan application. Based upon that information provided by you in your loan application, banks calculate three important ratios as given below. Your loan eligibility amount is calculated based upon each of these individual ratios and then minimum of these three eligibility amounts, your final loan eligibility is determined, which is mostly a minimum of all the three values arrived at. This is the ratio of your fixed obligation to your income. To calculate fixed obligation to income ratio, banks consider the other fixed obligation of the customers which are currently due to him and indeed act as the maximum monthly repayment capacity of the customer.
FOIR is significant as it considers repayment of loans (existing and proposed home loan) from the applicant’s income.
Most of the banks and financial institutions shy away to finance more than 70% to 80% of the property value.
Loan to value ratio is limit of finance an individual can get based upon the property type and the value of the property. Limiting the loan eligibility on the basis of LTV is very natural because the hypothecation or mortgage is based upon the property itself. Installment to income ratio helps lender to know the eligibility of a person to repay the loan. DisclaimerLots of approximations and assumptions have been made while developing the calculators. Dollar Bank auto calculators allow users to determine how large of an auto loan they might be eligible for, how much monthly loan payments will be, their potential interest savings from transferring a loan to Dollar Bank, and their debt-to-income ratio. This calculator will determine how large of an auto or personal loan an individual might be able to qualify for. Transferring a loan from one financial institution to another (Dollar Bank) can sometimes equal increased savings in terms of interest paid on a loan.
I will show you how banks calculate your home loan eligibility and what are some of those factors which can impact your loan eligibility. Just because you are earning Rs 1 lac a month, does not mean that you can take a Rs 50 lacs loan. While this article is true for all kinds of loans, still we will focus on home loan eligibility in this article. Assuming that the bank takes 20 yrs tenure and interest rate of 10.5% , the EMI required to pay Rs 1 lac loan per month comes to Rs 998. There are various banks which use different formulas and calculations, but all of them will revolve around this same logic I explained about. In the example above I have taken 50% as the assumption, but some banks might take it as 40% or even 35% . Some lenders might not use all the factors, but still its a good idea to understand how its related and do something about it.
Its very simple, higher your income, higher is the chance of you being able to pay the bigger liability. Its more easier for a salaried person to get a loan compared to a self employed person earning Rs 1 lac a month for obvious reasons. In reality your income can be anything, but what really matters is your income on papers, which is ITR returns you have filed over last 2-3 yrs.
Imagine that he has a bad record in past and he had not paid his past EMI’s on time and his overall credit score was bad, then it might happen that the bank agrees to only approve Rs 10-15 lacs of loan instead of his original 40 lacs loan.
However certain jobs like BPO sector jobs , running your own shop, Insurance Agent have lower loan eligibility because the income is uncertain or the chances of losing a job is higher.
So if you were planning to take a loan for 10 yrs, and assume that your loan eligibility came to Rs 20 lacs, if might happen that it goes up to 30 lacs if you are ready to take a 20 yrs loan.
This is because in that case, your monthly savings will go up and that will increase your loan eligibility . You have to think about how you can show the bank that you have a higher amount available with you.
Now if you cant prepay it fully, what if you can increase the tenure to 10 yrs , may be the EMI comes down to Rs 9,000 ?
In some banks this thing might not be of any use if they do their calculation on outstanding loan. If you include your spouse or parents as additional loan applicants, then your overall loan eligibility will go up because now there is more income to support that loan.


Even if you mention that your spouse also earns some additional income which can be used later, then it might help sometimes. The house that I have in my native place is very old and I decided to construct a new one without demolishing the old one. We will also discuss about different parameters of your credit profile, which help the lenders to determine your home loan eligibility amount. But it is to be remembered that they are also commercial organisations and they are doing business for earning a profit for their shareholders.
Every bank in India has its own policy and standard for reviewing the loan application and to evaluate the home loan eligibility amount. Let us go into details of these three ratios and understand how these are actually calculated. Statutory deductions like provident fund, professional tax, investment deductions like insurance premium, recurring deposit installments etc. Your loan eligibility is determined in such a way that this ratio doesn’t cross the usual limit of 50%.
Loan to value ratio sets the uppermost limit of the maximum amount of loan to be granted, irrespective of your eligibility for a higher amount depending upon your credit profile and your repayment capacity.
By limiting the home loan eligibility to 70 to 80%, the lender actually protects himself from the possible downturn in the property cycle and the reduction in the property value in case the borrower is not in a position to repay the loan.
Lenders usually assume that a person can pay a maximum installment of about 35 to 45% of his monthly income. At the end, I am also going to share some tips you can take to increase your home loan eligibility. Its always based on a formula and is calculated based on some formula and logic, which we are going to see today. Note that a lot of banks will ask for your salary slips for past 1 yr and 3 yrs of IT returns, and bank statement for atleast 6 months. A lot of people do not disclose their full income and pay less taxes, Its going to directly impact their loan home eligibility. Check with the bank about it and you might get a slightly less interest rate, which can matter a lot on long term. So if you have any other EMI going on and you cant prepay it fully, then at least you can increase the tenure of that other loan, which will decrease the EMI part and that would leave you with more money in your hand each month. This particular point is not going to increase your loan eligibility, but at times this can help you get your loan approved. I have taken a homeloan for the house I presently live and my wife is a co owner and borrower for this property .
I want to buy a home after 3 years or later and if i file my ITR return for this 3 years showing my annual income around Rs.60000 (only stipend income) and after 3 years if i get a job having a package of Rs.
Before sanctioning a loan to a prospective borrower, every lender tries to ensure that the borrower has the capacity to pay the EMI installments in time and repay the principal. In case the total sum of all the EMI installments due to him increases more than this amount, he will not be able to sustain his lifestyle and is likely to default in future. Think for a minute and trust me, you will yourself realise that calculating someone’s loan eligibility can be very easy. As a thumb rule, banks in India assume that you are able to save anywhere from 40%-50% of your in hand income. This is to calculate and get an idea of your overall cash flows and what are your spending patterns. A person in his 30’s can pay the loan for next 30 yrs, but a person who is 50 yrs old will retire at 60 and has just 10 yrs in hand and in that case, he can get a loan for lower amount compared to more younger person. But you have an existing personal loan for which you are paying Rs 15,000 per month EMI and that leaves you with remaining Rs 25,000 only. Now imagine that you have Rs 1 lac in outstanding for that personal loan and its going to complete in next 8 months, after which you will have full 40,000 with you for paying home loan EMI . Currently i save my stipend income in mutual funds, rd & atal pension for home loan purpose, please suggest me.



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