A general question that comes in the mind of first time home buyers is how much home loan can I afford in Mumbai? Let’s face it! Not everyone in Mumbai is uber rich to buy an apartment without a home loan. Most first time home buyers in Mumbai take a loan. Experts are of two opinion as to how much share of your salary should be used for home loan? Some calculate with a base of gross salary before taxes. Others calculate based on net take home salary after taxes. The consensus is that your home loan EMI should not exceed 35% of your income.
The best way to decide your home loan affordability is to reverse calculate. Banks will give you a home loan up to a 3 to 5 times your annual salary. Initial down payment also plays apart in it. Let’s take an example. Assuming your annual salary is Rs. 12 Lacs. Banks will approve you for a home loan from 36 Lacs to 60 Lacs
Home Loan Scenario – Gross Salary
- Gross monthly salary = Rs. 1 Lac Allot 30% of that for EMI = Rs. 30,000
Add property taxes, utility bills, maintenance bills, etc should equal to max 35% - At 10% annual EMI rates, loans amount to approximately 1 lakh/1 crore
So Rs. 30,000 EMI qualify for a maximum loan = 30 Lacs - Save 20% down payment to reduce the EMI burden
Brings the total home purchase value of Rs 37.50 Lacs.
Home Loan Scenario – Net Salary
- Net monthly salary = Rs. 75,000Allot 30% of that for EMI = Rs. 22,500
Add property taxes, utility bills, maintenance bills, etc should equal to max 35% - At 10% annual EMI rates, loans amount to approximately 1 lakh/1 crore
So Rs. 22,500 EMI qualify for a maximum loan = 22.50 Lacs - Save 20% down payment to reduce the EMI burden
Brings the total home purchase value of Rs 28.125 Lacs
Once you come to a conclusion on your home loan budget, you will be able to short list the locations. It is a good idea to consider under construction projects and pre-launch off plan projects. Under construction off plan projects help you bridge the gap. Builders tie up with banks and give you various subvention schemes. First time home buyers can make payments as and when the project is completed. It is a win win situation for both.