Buying a home is the biggest financial decision most Indians make – and the home loan that comes with it can last 20 years or more. Borrow too little and you may not find the home you want; borrow too much and your EMI can squeeze every other part of your life. Here’s a simple way to work out how much home loan you can comfortably afford.
The 40% Rule
Banks look at how much of your take-home pay goes into loan EMIs. Most lenders are comfortable when all your EMIs together – home loan, car loan, personal loan – stay within 40–50% of your monthly take-home salary.
But what a bank will lend you and what you can comfortably repay aren’t the same thing. A safer personal rule: keep your home loan EMI at or below 40% of your take-home pay, and closer to 30–35% if you have other loans, dependants or an irregular income.
How Much You Can Borrow
Here’s what an EMI of 40% of take-home pay can support, assuming an 8.5% interest rate for 20 years (check current rates with your bank – they change):
| Monthly Take-Home | EMI (40%) | Loan You Can Afford | Home Budget (with 20% down payment) |
|---|---|---|---|
| ₹50,000 | ₹20,000 | ₹23 lakh | ₹28.8 lakh |
| ₹75,000 | ₹30,000 | ₹34.6 lakh | ₹43.2 lakh |
| ₹1,00,000 | ₹40,000 | ₹46.1 lakh | ₹57.6 lakh |
| ₹1,50,000 | ₹60,000 | ₹69.1 lakh | ₹86.4 lakh |
Want to check a specific loan amount? Use our EMI Calculator to see the exact EMI for any loan, rate and tenure.
Don’t Forget the Down Payment
Banks won’t finance the full price of a home. RBI rules cap the loan at:
- 90% of the property value for loans up to ₹30 lakh
- 80% for loans between ₹30 lakh and ₹75 lakh
- 75% for loans above ₹75 lakh
On top of the down payment, budget for stamp duty and registration, which vary by state and are often around 5–8% of the property value, plus interiors, furniture and moving costs. These usually can’t be financed by the home loan, so save for them separately.
Tenure: The Hidden Cost of a Lower EMI
Stretching the loan over more years lowers your EMI – but costs you much more in interest. On a ₹50 lakh loan at 8.5%:
| Tenure | Monthly EMI | Total Interest Paid |
|---|---|---|
| 15 years | ₹49,237 | ₹38.6 lakh |
| 20 years | ₹43,391 | ₹54.1 lakh |
| 30 years | ₹38,446 | ₹88.4 lakh |
Going from 20 to 30 years cuts your EMI by about ₹5,000 a month but adds over ₹34 lakh in interest. A good middle path: choose a tenure you can comfortably afford today, then prepay whenever you get a bonus or salary hike. Even small prepayments in the early years can save lakhs.
Before You Sign: A Quick Checklist
- Emergency fund in place: keep at least 6 months of expenses plus EMIs aside, so a job loss doesn’t put your home at risk.
- Term insurance: make sure your cover is enough to repay the loan if something happens to you.
- Keep investing: don’t stop your retirement SIPs to fund a bigger home.
- Rent vs buy: compare your EMI with the rent for a similar home. If the EMI is far higher, renting and investing the difference may be the better choice for now.
Tax Benefits on a Home Loan
Under the old tax regime, you can deduct up to ₹2 lakh of interest a year on a self-occupied home, and principal repayment counts towards the ₹1.5 lakh 80C limit. Under the new regime, these deductions aren’t available for a home you live in. If you have a large home loan, the old regime may work out cheaper – compare both with our Income Tax Calculator. Renting while you pay off a home elsewhere? You may be able to claim HRA too – see our HRA Calculator.
Questions People Actually Ask Us
How much home loan can I get on a ₹1 lakh salary? With a ₹40,000 EMI (40% of take-home pay) at 8.5% for 20 years, about ₹46 lakh. Banks may offer more if you have no other loans, but borrowing the maximum isn’t always wise.
Does a joint home loan help? Yes. Adding an earning spouse or parent as a co-borrower combines your incomes, so you can borrow more – and both co-owners can claim tax benefits under the old regime.
Is it better to make a bigger down payment? A bigger down payment means a smaller loan and less interest. But don’t use your entire emergency fund for it.
Disclaimer: This article is for educational purposes only. Loan amounts are estimates based on an assumed 8.5% interest rate; actual eligibility depends on your lender, credit score, age and other factors. Please check current rates and terms with your bank. See our full Disclaimer.
