A home loan eligibility calculator is an online tool used to calculate or estimate the maximum loan amount you may qualify for when applying for a home loan. With the use of the right home loan calculator, you can plan your finances more effectively and efficiently understand your borrowing capacity.
What is a Home Loan Eligibility Calculator?
A home loan eligibility calculator is an online tool used to estimate the maximum eligible amount one can borrow for buying their dream house. Just type in a few basic details such as your age, monthly income, current EMIs (if any) and tenure of loan required, and the tool will generate an instant estimate of the total loan amount one can avail. This provides clarity on the loan size you can realistically aim for, avoiding applications for amounts that lenders will not approve.
Why Use a Home Loan Eligibility Calculator?
Here are the key benefits of using such a calculator:
- Instant Estimate: Get instant clarity on the amount you can borrow for your new home, without a bank having to assess it manually.
- Better Budget Planning: Knowing your loan limit helps you focus your housing search in a price range that is realistic for you, so you do not fall in love with a house that’s out of reach.
- Experiment with Variables: You can adjust your monthly income, loan terms or existing liabilities to see how any of these criteria affect your eligibility. The functionality lets you optimise the financial approach that suits your situation best.
- No Impact on Credit Score: As this is a preliminary tool, not an actual loan application, using it will not affect the credit history or score.
- Apply Right, Avoid Rejections: When you know what kind of loan amount is feasible, there’s a greater chance that you will apply for an amount realistic to both your financial health and the lender’s requirements and reduce the chance of a feasible application.
- Always Accessible & Free: You can reach it at any time, from anywhere. No forms or branch visits are needed.
How to Calculate Home Loan Eligibility?
To calculate home loan eligibility, lenders usually assess your financial capacity, income stability, and existing liabilities to determine the maximum loan amount you can borrow. The process mainly revolves around your monthly income and repayment ability.
Banks and financial institutions first assess your net monthly income (NMI). Rule of Thumb: Typically, 40-50% of your NMI can be utilised for your EMI. If you are earning INR 80,000 per month, there may be lenders who consider an EMI of up to the range of INR 32,000 to INR 40,000 (subject to internal criteria).
Secondly, your lender also takes into consideration payments you are currently making on other obligations, be it a personal loan, car loan or EMI on a credit card. If you have existing loans, the amount earmarked for your home loan’s EMIs will be reduced.
Another important factor is the loan-to-value (LTV) ratio, which defines how much of the property’s value the bank will finance. Typically, lenders cover 75-90% of the property’s cost, with the borrower required to make a down payment for the remaining amount.
And your credit score is a big part of that equation. The higher the score (750 and above), the better your prospects of being eligible for optimum interest rates. The type and stability of employment (salaried, self-employed, or business professional) also have a bearing on eligibility.
Many lenders also provide a home loan eligibility calculator online. By entering your income, age, existing EMIs, and loan tenure, you can get an instant estimate of the eligible loan amount.
Conclusion
A home loan eligibility calculator is a good starting point before beginning the process to determine the amount. It helps to have an understanding of the major factors involved in home loan approval, like income, liabilities, credit score and repayment capacity. Understanding your home loan eligibility will help you set realistic goals, plan better and avoid unnecessary rejections. This free software will ensure you only apply for the loan amount that both you and your lender agree on.