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Buying a home worth Rs 1 crore with a home loan is a major financial commitment, but with the right planning, it is achievable.
Check the important factors including your monthly EMI payment and overall financial requirements. (Representative image)
Buying a home worth Rs 1 crore is a major financial commitment, and most home buyers in India rely on home loans to make that dream a reality. However, understanding how much salary you need, the loan eligibility process and other related costs are important before taking this step. In this guide, we’ll break down how much you need to earn to comfortably afford the loan and related expenses. Let’s explore the important factors including your monthly payment. EMI and overall financial needs.
Key assumptions for calculations.
The following assumptions are being made to give you an idea of the minimum salary required to get a home loan of Rs 1 crore.
- House Price: Rs 1 Crore (Rs 1,00,00,000).
- Home Loan Amount: Banks usually offer loans up to 80% of the property value. For a house worth Rs 1 crore, this means the loan would be Rs 80 lakh (Rs 80,00,000).
- Down Payment: You have to put down 20% of the property price yourself. This works out to Rs 20 Lakhs (Rs 20,00,000).
- Loan tenure: Longer loan tenure gives smaller EMIs, and here we will assume a 30-year loan tenure (360 months).
- Interest Rate: The interest rate for home loans is around 8.5% per annum (subject to change based on market conditions).
- EMI Affordability: To ensure affordability of the loan, most banks recommend that your monthly EMI should not exceed 40% to 50% of your monthly income.
Calculation of EMI
Now, let’s calculate the monthly EMI for a loan of Rs 80 lakh.
Formula of EMI
The EMI formula is: Px R x (1+R)^N / [(1+R)^N-1]
P: is the principal amount of the loan.
R: is the monthly interest rate, which is the annual interest rate divided by 12.
N: The loan period is in months.
where:
P = Loan amount = Rs.80,00,000
R = Monthly interest rate = Annual interest rate / 12
(So, 8.5% annual interest = 8.5/100/12 = 0.007083 per month)
N = Loan tenure in months = 30 years × 12 = 360 months
Using the formula, the EMI works out to Rs 61,500 per month for a loan of Rs 80 lakh.
How much salary do you need?
Calculation of salary for loan eligibility
Banks generally consider that 40% to 50% of your monthly income should go towards loan repayments. Based on an EMI of Rs 61,500, here’s how we calculate the required monthly income:
If EMI is 40% of income, your monthly income should be at least:
Required monthly income = EMI/0.4
61,500/0.4 = Rs.1,53,750
Annual Salary: If your monthly salary is Rs 1,53,750 then your annual income will be:
Desired annual salary= Rs.1,53,750 × 12 = Rs.18,45,000
Considering other expenses
Down payment:
You will need Rs 20 lakh for the down payment, which is 20% of the house price.
Stamp Duty and Registration:
Generally, stamp duty and registration charges are 6-8% of the property value. For a Rs 1 crore property, it would be around Rs 6-8 lakh.
Miscellaneous Expenses:
You may incur additional expenses such as legal fees, maintenance, home furnishings, and moving expenses.
Summary
- Loan Amount: Rs.80 Lakhs (80% of Rs.1 Crore).
- Down payment: Rs 20 lakh (20% of Rs 1 crore).
- Monthly EMI: Rs 61,500 (at 8.5% interest for 30 years for a loan of Rs 80 lakh).
- Minimum Monthly Salary: Rs.1,53,750.
- Minimum Annual Salary: Rs 18.5 Lakhs.
Buying a house worth Rs 1 crore with a home loan in India is a major financial commitment, but with the right planning, it is achievable. To comfortably afford the loan, you’ll need a minimum annual income of Rs 18.5 lakh, along with enough savings for the down payment and additional expenses like stamp duty and registration.
Before making any decision, it is important to assess your financial stability, other obligations and long-term goals. If you’re willing, a 30-year loan tenure can make the monthly EMI more manageable, while helping you invest in a property that suits your needs.
By keeping your budget in mind and choosing the right loan option, you can take the necessary steps toward home ownership without overstretching your finances.
Disclaimer: The views and investment tips of the experts in this News18.com report are their own and not those of the website or its management. Readers are advised to consult qualified experts before making any investment decision.