“What is my budget?” is the first question every buyer asks and the one most often answered with a guess. A bank does not guess. It checks three limits and takes the lowest. If you know them in advance, you can set a realistic budget before you fall for a flat that the numbers cannot support.
The three limits a lender applies
- Loan-to-value (LTV). The Reserve Bank of India limits how much of a property’s value a bank may lend. The rest, your down payment, has to come from you. The permitted share is higher on smaller loans and lower on larger ones, so check the current RBI norms.
- EMI-to-income. Lenders compare your total monthly EMIs, new loan plus existing ones, with your net monthly income. A common range is around 40 to 50%.
- Age and tenure. The loan usually has to end before a set retirement age, so older applicants get shorter tenures and a smaller loan for the same income.
The EMI formula in plain words
Your EMI depends on three inputs: the loan amount, the interest rate and the tenure. You do not need to do the maths by hand, but it helps to see how sensitive it is. For a Rs 40 lakh loan over 20 years:
| Interest rate (illustrative) | Monthly EMI | Net monthly income needed at 40% rule | At 50% rule |
|---|---|---|---|
| 8.0% | Rs 33,458 | Rs 83,644 | Rs 66,915 |
| 8.5% | Rs 34,713 | Rs 86,782 | Rs 69,426 |
| 9.0% | Rs 35,989 | Rs 89,973 | Rs 71,978 |
A one-point rate move changes the EMI by roughly Rs 2,500 a month on this loan. These rates are examples, not current offers.
A worked example, step by step
Buyer profile: net monthly income Rs 80,000, no existing EMIs, comfortable at 40%, loan at an assumed 8.5% for 20 years.
- Maximum EMI: 40% of Rs 80,000 = Rs 32,000 a month.
- Loan that EMI supports: at 8.5% over 20 years, an EMI of Rs 32,000 supports a loan of about Rs 36.9 lakh.
- Add your down payment: the property price you can target is the loan plus your own contribution, subject to the lender’s LTV limit.
- Add the extras: stamp duty, registration, GST where applicable, and moving or fit-out costs are on top. Use our stamp duty calculator for that part.
If the same buyer already pays Rs 10,000 a month on another loan, the new EMI headroom shrinks to Rs 22,000 and the affordable loan falls sharply. That is why existing EMIs matter so much.
The tenure trade-off
| Tenure (Rs 40 lakh at 8.5%) | Monthly EMI |
|---|---|
| 15 years | Rs 39,390 |
| 20 years | Rs 34,713 |
| 25 years | Rs 32,209 |
| 30 years | Rs 30,757 |
Over 20 years at 8.5%, you would repay about Rs 83.3 lakh in total on a Rs 40 lakh loan, which is about Rs 43.3 lakh of interest. A longer tenure lowers the monthly burden but raises the total cost. Many borrowers pick a longer tenure and prepay when they can.
Five habits that raise your eligibility
- Clear or reduce credit card balances and small loans before applying.
- Check your credit score and fix errors early.
- Add an earning co-applicant if possible.
- Keep your income proof tidy: salary slips, bank statements and tax returns.
- Compare at least three lenders on rate, processing fee and prepayment terms.
Before you commit
Whatever the bank approves, decide on a budget you can live with if rates rise or income dips. Then check the project itself: our guides on verifying RERA registration and the seven documents to demand keep you from financing a problem. Try the Affordability Calculator with your own numbers.
All figures are illustrative calculations, not offers. Rates, fees and eligibility vary by lender and applicant.
