How Loan Affordability Is Calculated
Lenders work backwards from your monthly repayment capacity:
1. EMI budget = (Income × Cap%) − existing EMIs. With ₹1,00,000 income at the typical 40% cap and no existing EMIs, that's ₹40,000/month.
2. Maximum loan reverses the EMI formula: Loan = EMI × [(1+i)ⁿ − 1] ÷ [i(1+i)ⁿ] where i = monthly rate, n = months. ₹40,000/month at 9% for 20 years supports ≈ ₹44.5 lakh.
3. DTI check = total EMIs ÷ income. Under 36% is comfortable; 36–43% acceptable; above 50% most lenders decline.
Know your target loan already? Compute its exact EMI in the EMI Calculator, or full house costs in the Mortgage Calculator.
Frequently Asked Questions
How much loan can I get on my salary?
Most lenders cap total EMIs at 40–50% of gross income. ₹1L income → ₹40–50k EMI room → roughly ₹37–46 lakh at 9% over 20 years.
What is a good debt-to-income ratio?
Below 36% is comfortable, 36–43% acceptable, above 50% is usually rejected. Lower DTI also gets you better rates.
How is maximum loan derived from EMI?
Loan = EMI × [(1+i)ⁿ − 1] ÷ [i(1+i)ⁿ]. Longer tenures and lower rates raise the amount the same EMI can support.
Should I borrow the bank's maximum?
Planners suggest staying near 28–30% of income for housing EMIs — leaving room for savings, investing and rate hikes. Use the 30% cap option above to see the safer figure.