How Your Home Loan Eligibility is Calculated

By | August 20, 2015

Applicant 2 – A Business man:

Navodit, 30, is a business man. His annual income is 6 lakhs (not his actual income). Prakash takes his average income as per his ITR, for the last 3 years. He then divides it into 12, to get his monthly income. He then follows the same process. So if Navodit has no other loans, he is eligible for a loan of 20.32 lakhs.

Illustration: Navodit’s monthly income: Rs.50,000 (6,00,000 /12)

Now if Navodit applies for the loan for 15 years at 11% interest rate, his eligibility is calculated as: 50000 X 50%/1230* =20.32 lakhs

*(50% is the FOIR and 1230 the EMI per lakh at 11% for 15 years tenure)

For the self-employed, banks calculate the loan eligibility based on their Income Tax returns. If you do not reveal your actual income while filing tax, or write off part of your income as expenses (to save tax), it may be difficult for you to get a higher loan amount.

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