Key takeaways
- Home loan eligibility depends on income, existing liabilities, credit score, and the property's value
- Banks typically lend 75–90% of property value (LTV ratio) — the rest is your down payment
- You get tax benefits on both principal (Section 80C) and interest (Section 24b), but only under the old tax regime
- Floating rate loans are riskier but usually cheaper over long tenures than fixed rate loans
- Compare processing fees and prepayment charges — not just the headline interest rate
- A longer tenure lowers your EMI but significantly increases total interest paid over the loan's life
Quick answer
A home loan lets you borrow 75–90% of a property's value, repaid over a tenure of up to 30 years through EMIs. Your eligibility depends mainly on income and existing debt, your rate depends on your credit score and lender, and your tax benefits depend on which tax regime you choose.
How much can you borrow?
Banks typically approve a home loan where your total EMI (all loans combined) doesn't exceed 40–50% of your net monthly income. So if you take home ₹80,000/month, your total EMI commitments should ideally stay under ₹32,000–₹40,000.
They also have a Loan-to-Value (LTV) cap: banks lend a maximum of 75–90% of the property's registered value, not the market value. The rest is your down payment.
| Loan amount | Maximum LTV allowed |
|---|---|
| Up to ₹30 lakh | Up to 90% |
| ₹30 lakh – ₹75 lakh | Up to 80% |
| Above ₹75 lakh | Up to 75% |
Common misconception: LTV is calculated on the property's registered or agreement value, not the price you may have informally agreed with the seller, and not the property's market appreciation potential. Always check which valuation your lender is using before assuming your down payment requirement.
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How this played out for one borrower
Meenal, earning ₹95,000/month, assumed she'd easily qualify for a ₹60 lakh home loan based on the "5x annual income" rule of thumb she'd read online — her annual income of ₹11.4 lakh times 5 suggested she should get close to ₹57 lakh.
When she actually applied, her sanctioned amount came in noticeably lower. The bank explained why: she was still repaying a ₹12,000/month car loan, which counted against her FOIR and reduced how much home loan EMI she could take on. Her credit score of 715 also meant she didn't qualify for the bank's best rate, which further limited her eligible amount at a comfortable EMI.
Meenal paid off the car loan a few months later and reapplied, this time qualifying for a noticeably larger amount at a better rate — the rule of thumb hadn't been wrong exactly, it just hadn't accounted for her existing liability or her credit score, both of which the bank weighed just as heavily as her income.
What determines your eligibility
Lenders assess several factors together, not just your salary in isolation.
Income and employment stability
Salaried applicants generally need at least 2–3 years of work experience, with the last few months' salary slips and Form 16 as proof. Self-employed applicants typically need 2–3 years of income tax returns and business continuity proof, since income is harder to verify month-to-month.
Existing liabilities (FOIR)
Lenders calculate your Fixed Obligation to Income Ratio (FOIR) — your total EMIs (existing + proposed) as a percentage of your net income. A high FOIR from existing car loans, personal loans, or credit card debt can significantly reduce how much home loan you qualify for, even if your salary looks sufficient on paper — as Meenal's example above shows.
Credit score
A credit score of 750+ typically gets you the best available rate; scores below 650 may mean rejection or a meaningfully higher interest rate, if approved at all. Checking and improving your score before applying is one of the highest-leverage things you can do before a home loan application — see our guide to what a CIBIL score is and our guide to checking and improving it for free before you apply.
Property type and location
Ready-to-move properties with clear title are generally easier to get approved than under-construction projects or properties with disputed or unclear title documents. Some lenders maintain approved-project lists for large developers, which can speed up processing.
A common (simplified) rule of thumb: your maximum eligible home loan is often around 5x your annual net income, though this varies significantly by lender, existing liabilities, age, and tenure chosen. Treat this as a starting estimate, not a guarantee — Meenal's example above shows exactly how existing liabilities and credit score can pull the real number below this simple multiple.
Documents you'll typically need
- Identity and address proof (PAN, Aadhaar, passport, etc.)
- Income proof: salary slips and Form 16 (salaried) or ITRs and business proof (self-employed)
- Bank statements, usually the last 6 months
- Property documents: sale agreement, title deed, approved building plan, and NOC from the society or developer, where applicable
- Passport-size photographs and a duly filled application form
Exact requirements vary by lender and whether the property is ready-to-move, under-construction, or a resale unit, so confirm the specific checklist with your chosen bank before applying.
Tax benefits on home loans
| Section | What you can deduct |
|---|---|
| Section 24(b) | Interest paid on home loan for a self-occupied property, subject to an annual cap |
| Section 80C | Principal repaid, within the overall combined 80C limit alongside other eligible investments |
| Section 80EEA | Additional interest deduction for first-time buyers under specific affordable-housing conditions |
Old regime only: Section 24(b), Section 80C, and Section 80EEA are all only available under the old income tax regime. Under the new regime — now the default — you cannot claim home loan interest on a self-occupied property, principal repayment, or the additional first-time-buyer interest deduction. This is a key reason the old regime can win for home loan borrowers with high interest outgo. Our old vs new tax regime guide walks through the full break-even comparison.
Expert tip: exact deduction limits and eligibility conditions for these sections are set by tax law and are revised periodically. Verify the current limits with a tax advisor or the Income Tax Department's official resources before filing, rather than relying on a fixed figure.
Fixed vs floating rate
Fixed rate: Your interest rate doesn't change for the fixed period. Predictable EMI. Usually meaningfully higher than the prevailing floating rate at the time you borrow.
Floating rate: Linked to an external benchmark such as the repo rate. Changes when the benchmark changes. Most home loans in India are floating — and over a 20-year tenure, rates will go up and down multiple times.
Historically, floating rate borrowers have paid less total interest over long tenures than fixed rate borrowers, because rate cycles tend to average out over decades. But there's real uncertainty involved — a rising rate environment can meaningfully increase your EMI or tenure partway through the loan.
| Factor | Fixed rate |
|---|---|
| Rate predictability | High — locked for the fixed period |
| Starting rate | Usually higher than floating |
| Best suited for | Borrowers who strongly prefer certainty over potential savings |
Processing fees, prepayment charges, and other costs
The headline interest rate is only part of the true cost of a home loan. Several other charges affect the total cost significantly. Understanding how flat vs reducing balance interest works also matters here — see our flat rate vs reducing balance guide if you're comparing offers that don't clearly state their calculation method.
Processing fee
A one-time fee, typically a small percentage of the loan amount (often with a cap), charged for processing your application. This is usually negotiable, especially during promotional periods or for high-value loans.
Prepayment and foreclosure charges
For floating rate home loans to individual borrowers, regulations generally prohibit lenders from charging prepayment or foreclosure penalties. Fixed rate loans, however, may still carry prepayment charges — confirm this explicitly before signing, since it affects how much flexibility you have to close the loan early. Our guide to how prepayment saves money covers exactly how much this flexibility is worth.
Other charges to check
- Legal and technical valuation fees for the property
- Stamp duty and registration charges (separate from the loan itself, but a major part of total cost)
- Mortgage or loan insurance premiums, if bundled into the loan
- Late payment or EMI bounce charges
Common mistake: comparing two loan offers purely on interest rate while ignoring processing fees and insurance bundling. A slightly higher rate with lower total fees can sometimes work out cheaper than a marginally lower rate loaded with charges.
How loan tenure affects your EMI and total cost
A longer tenure reduces your monthly EMI, making the loan feel more affordable month to month — but it significantly increases the total interest you pay over the life of the loan.
15-year tenure: higher EMI, but meaningfully lower total interest paid
25-year tenure: lower EMI, but total interest paid can end up close to or even exceeding the principal itself
✅ Choosing the shortest tenure your monthly budget can comfortably support — rather than automatically taking the maximum tenure offered — is one of the simplest ways to reduce your total interest cost.
Government schemes and subsidies
Depending on your income category and whether it's your first home, you may be eligible for interest subsidy schemes administered under affordable housing initiatives. Eligibility criteria, subsidy amounts, and income caps are revised periodically by the relevant government department, so check current eligibility directly with your lender or the scheme's official portal rather than assuming eligibility based on older information.
Common home loan mistakes
Maximizing tenure to minimize EMI: stretching to the longest tenure available lowers your monthly outgo but can dramatically increase total interest paid — sometimes to more than the original loan amount.
Not comparing the effective rate across lenders: two lenders quoting similar headline rates can have very different processing fees, insurance bundling, and prepayment terms that change the true cost significantly.
Skipping the fine print on floating rate resets: understand exactly how and when your floating rate resets (monthly, quarterly, or on rate-change events), since this affects how quickly your EMI responds to interest rate movements.
Not checking prepayment terms before signing: if you expect a bonus, inheritance, or salary growth that could let you prepay aggressively, confirm your loan allows this without penalty before committing to a specific lender or rate type.
Trusting a rule-of-thumb eligibility estimate without accounting for existing debt: as Meenal's example above shows, a simple income multiple can overstate what you'll actually qualify for if you're still repaying another loan or your credit score isn't in the best bracket.
Once you've got a sense of your eligibility, our step-by-step guide to the home loan EMI calculator walks through every field — down payment, fees, prepayment modelling, and the scenario comparison tool — so you can run your own numbers before applying.
Frequently asked questions
How much home loan can I get based on my salary?
Lenders typically cap your total EMI obligations (existing plus proposed) at 40–50% of your net monthly income. Your maximum eligible loan amount depends on this ratio, your existing liabilities, credit score, and the tenure you choose — a rough starting estimate is often around 5x your annual net income, though as Meenal's example above shows, existing debt and credit score can pull this down meaningfully.
What is the maximum LTV ratio for a home loan?
Banks typically lend up to 90% of the property's registered value for loans up to ₹30 lakh, up to 80% for loans between ₹30–75 lakh, and up to 75% for loans above ₹75 lakh. The remaining amount must be paid as your down payment.
Should I choose a fixed or floating rate home loan?
Floating rate loans have historically cost less in total interest over long tenures, since rate cycles tend to average out over decades, but they carry more uncertainty since your EMI can rise if rates increase. Fixed rate loans offer predictability at a usually higher starting rate. The right choice depends on your comfort with EMI fluctuation versus your preference for certainty.
Can I claim tax benefits on a home loan under the new tax regime?
No. Home loan interest deduction under Section 24(b) for a self-occupied property, and principal deduction under Section 80C, are only available under the old tax regime. If your home loan interest outgo is significant, this is a major factor to weigh when choosing between tax regimes.
Is a longer loan tenure always a bad idea?
Not always — a longer tenure can make sense if it meaningfully improves monthly cash flow for other financial goals, such as maintaining an emergency fund or continuing SIP investments. But it does increase total interest paid, so it's worth choosing the shortest tenure your budget can comfortably sustain rather than defaulting to the maximum offered.
Are there prepayment charges on home loans?
For floating rate home loans to individual borrowers, regulations generally prohibit prepayment or foreclosure charges. Fixed rate loans may still carry such charges, so confirm this explicitly with your lender before signing, especially if you expect to prepay significantly in the future.
What documents are required for a home loan application?
Typically identity and address proof, income proof (salary slips and Form 16 for salaried applicants, or ITRs for self-employed), bank statements, and property documents such as the sale agreement and title deed. Exact requirements vary by lender and property type, so confirm the specific checklist before applying.
Does an existing car loan or personal loan actually reduce my home loan eligibility?
Yes, significantly. Lenders factor all your existing EMI obligations into your FOIR (Fixed Obligation to Income Ratio), so an existing car or personal loan reduces how much home loan EMI you can take on — exactly what happened to Meenal in the example above, until she paid off her car loan and reapplied.
