[Calculator] Which house can I afford with a loan?

Real Estate just happens to be a purchase where you never, ever, stick to your budget. I have heard countless stories where people went to buy a 1 bhk but ended up booking a 3 bhk. A 1000 sq.ft. carpet soon became a 1600 sq.ft. carpet.

And then you go about running calculations with your excel sheet, banker and family.

Can we afford this? Do we have enough downpayment? HOw much loan will we get? Can we service the EMI? and many more.

If you are out in the market for buying your first house, there will be several questions crossing your mind.

I have lived this experience myself as well as with other people, who I was trying to help.

Well, let’s see if we can get some answers to the questions and act a bit rational.

Here’s the link to the Home Affordability and Loan Eligibility calculator page.

Do share you feedback and comments and share with others so that they can benefit from it too.

What can I know with this calculator?

This calculator can help you set your homebuying budget. You can get an estimate of the house you can afford with a mix of your savings as well as a mortgage/ loan. 

Which incomes can I include?

Include all incomes such as business, salary, interest, rent, etc - post tax, as reflected in your tax returns. If your spouse is also going to be a co-applicant, add up their income as well. This helps you raise the loan eligibility.

Does my credit score impact my loan?

The credit score is an important parameter in your loan processing. Most banks insist on having a good credit score (750 or above) to become eligible for a loan. If you have a higher score, say 800+ with CIBIL, then you get a preferred rate of interest, which is lower than the usual rate the bank offers. Check with your bank for more details.

How does loan to income ratio impact affordability?

Well, it is quite simple. Most banks will allow you a loan that doesn't commit more than half of your income towards loan repayments. For lower incomes, this ratio is low and for higher incomes, it is high. For example, if you have over a lakh income per month, then the banks may be willing to allow upto 55% of your income as loan repayments. 

What if I have other loans I service via EMIs?

Any current loans or EMIs will reduce your overall eligibility for new loans. The bank takes into account the overall loan to income ratio and then deducts any existing EMIs to arrive at new loan eligibility. Use the calculator to see this in action. 

What are the upfront costs of buying a home?

The biggest upfront cost is going to be your stamp duty and registration charges, which can range from 5% to 10% of the agreement value depending upon the state you reside in. If you are using the help of a real estate agent in a resale property, they can take a commission of 1% to 3% of the agreement value. Then there are lawyer charges, building / society NOC charges. Last, but not the least, you might need to do repairs/renovation or furnishing of the house you plan to move into. 

What other ongoing expenses should I consider when I buy a home? 

Typically, these ongoing expenses include maintenance charges for the building/society, property taxes and insurance. 

When should I not buy a house?

Interesting question. Read up this note from earlier.