How Much Home Loan Can I Afford? The 3-20-30-40 Rule for India
Determining home affordability isn't just about what the bank is willing to lend you — it's about keeping your total monthly debt obligations within a sustainable threshold without compromising your retirement savings.
Key Financial Takeaways
- Keep total EMIs strictly under 40% of your take-home salary (FOIR guideline).
- Ensure you have a minimum 20% down payment plus 7-10% extra for stamp duty, registration, and interior expenses.
- Maintain a 6-month emergency fund completely untouched after paying the down payment.
Check Your Home Loan Eligibility
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The FOIR Rule Explained
Fixed Obligation to Income Ratio (FOIR) is the metric banks use to evaluate your maximum loan eligibility. Most top Indian banks cap FOIR at 40% to 50% of your net monthly in-hand salary.
If your monthly take-home salary is ₹1,00,000 and you currently pay ₹10,000 for a car loan EMI, your remaining affordable EMI for a home loan is ₹40,000 (at 50% FOIR limit).
At an 8.5% interest rate over 20 years, a ₹40,000 EMI translates to an eligible home loan amount of approximately ₹46 Lakh.
Frequently Asked Questions
Can adding a co-applicant increase my loan limit?
Yes! Adding an earning co-applicant (such as your spouse or working parent) combines your monthly incomes and significantly boosts your loan eligibility.
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