pnb housing
May 20th, 2022

How Much Home Loan Can I Get on 40,000 Salary?

Today’s article will discuss what portion of your salary is considered when determining eligibility, what factors impact your eligibility, and how simple it is to apply for a house loan.

Purchasing a home throughout one’s lifetime is regarded as a crucial step toward obtaining the status of ‘being settled’, particularly in Indian culture. However, with property prices out of reach for the employed people, this goal can only be realized later in life once they have acquired adequate money. This is where taking out a house loan might help you realize your ambition of becoming a homeowner at a young age. So, if you are wondering right now “How much home loan can I get on 40000 salary?, then this blog is for you.

Financial institutions determine the borrower’s eligibility based on two important factors – 

  1. Borrower’s willingness to pay:  Willingness to pay is judged by the borrower’s credit score. The credit score highlights the borrower’s current financial obligations as well as their credit history (credit repayment behaviour, credit type, duration, etc). Financial institutions prefer lending to individuals with a higher credit score, showcasing a good record of handling credit.
  2. Borrower’s repayment capacity: Salary is sometimes expressed as an in-hand salary, net or gross. It’s crucial to know the distinction since financial institutions typically look at the in-hand salary of a person when determining whether or not they qualify for a house loan. Salary structures vary per company, but they are often separated into the below-listed components:
    • Basic Salary
    • Medical Allowance
    • Leave Travel Allowance
    • House Rent Allowance

The gross portion of the remuneration comprises the components listed above. However, some necessary deductions from the net total, such as deductions for the EPF, Professional Tax, TDS, and so on, are deducted from the gross total. After that, an employee’s net compensation, often known as their in-hand income, is calculated. This net income, excluding personal and household expenses (generally 50%), determines if you are eligible for a house loan.

Must Read: How Much Minimum Down Payment is Required for Home Loan?

What is the Maximum Amount of a Home Loan that I am Eligible For?

Salaried individuals eligible for home loans can use the easy home loan eligibility calculator to determine the amount of loan available to them. 

Using a house loan eligibility calculator, which considers various criteria and monthly salary, is an accurate approach to determine your home loan eligibility. For example, input your monthly income i.e., Rs. 40,000 in the PNB Housing home loan eligibility calculator and input the other details as follows:

  • Interest rate: 8.25% p.a.
  • Tenure: 20 years
  • Existing EMIs: Zero

If your salary is Rs. 40,000, your repayment capacity will be Rs. 20,000 (50% of income as mentioned above). 

The calculator will give you the eligible home loan amount of around Rs. 26 lakh. Of course, you can change the above-mentioned parameters to accurately reflect your financial needs and situation in order to get a much more accurate home loan amount estimate.

Note: If a family has more than one earning member earner, the monthly salary of all income earners can be added together to get a greater home loan qualifying amount.

Must Read: Benefits of Taking a Joint Home Loan

Other Factors That Affect Home Loan Eligibility

Aside from net monthly income, additional factors also affect your home loan eligibility for 40000 salary. These are:

  • Age: Home Loans are offered to those aged 21 to 55. However, financial institutions prefer to lend to the younger generation. Because younger candidates have longer careers, their prospects of repaying house loans are higher. A house loan in the 50s may be shorter and cheaper in amount.
  • Occupation: People who work for a reputable company will likely acquire a house loan. It ensures prompt EMI payment. Similarly, assuming all other criteria are similar, you may qualify for home loan eligibility for a bigger amount if you work for a reputable company.
  • Credit score: Your prior loan repayment history is an essential component in evaluating your eligibility. Even when you make a good living, a bad credit score might prevent you from acquiring a house loan. Financial institutions want a credit index of 650 or higher. A credit score of 750+ might help you negotiate reduced Home Loan Interest rates on home loans.
  • Existing loans: Financial institutions consider personal loans, vehicle loans, durable consumer loans, credit cards, etc., are all considered by financial institutions when determining a person’s eligibility for a house loan. It guarantees that the borrower is not over-indebted and can afford to pay their EMIs on time.
  • Property value: In terms of house loans, the underlying asset’s health is critical. Financial institutions use two key factors to assess a prospective buyer’s property. These are usually done by independent valuers and lawyers authorized by the financial institution. You can get up to 90% of the property’s value as a home loan amount. 
  • Tenure: The length of the home loan or the tenure you choose also determines your eligibility. If you choose a long tenure, your EMIs will reduce which will increase the loan amount eligibility.

Conclusion

Before you start looking for your ideal home, you should know how much of a Home Loan you’ll be able to get based on your income. It will assist you in making a financial choice about the home you want to buy. You may use the Home Loan EMI Calculator to determine how much money you qualify for. Once you’ve decided on a property, go to the financial institution’s website and fill out the inquiry form to get a call from one of the counsellors.

With the knowledge mentioned above, one may confidently answer the issue of how much home loan one can acquire on their income and take a considerable step toward purchasing the dream home.

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