How Much Loan Can You Get from the Bank? Ujjawal Pahwa Explains It ALL

In this comprehensive explanation, Ujjawal Pahwa dives into the intricacies of determining the loan amount one can secure from a bank. He covers crucial factors such as the Fixed Obligation to Income Ratio (FOIR) and how it influences loan eligibility. By dissecting the impact of income and existing loans on the equation, Pahwa guides individuals through the process of estimating their potential home loan amount. His expert insights shed light on the multifaceted aspects considered by banks, ensuring that individuals have a clear understanding of how much they can realistically borrow to fulfill their financial goals.

Setting Home Loan Limits

To determine the loan amount you can secure, it's wise to follow a general guideline: your monthly home loan payment should typically range between 40-50% of your total household income after accounting for other debts.

The Crucial Role of FOIR

When assessing your eligibility for a home loan, lenders evaluate several factors, including the Fixed Obligation to Income Ratio (FOIR), which is typically capped at 40-50% of your monthly income. This calculation assumes that around 50% of your salary is allocated to monthly expenses, allowing you to estimate the amount available for your home loan by deducting 50% for expenses and existing EMIs from your income. Banks often leave some financial flexibility to ensure you can also save money.

Impact of Income and Existing Loans

In straightforward terms, your chances of securing a larger home loan are heightened with a higher income and lower existing loan payments. To illustrate, if you earn 1,00,000 rupees per month and have an existing car loan with a 15,000 rupee monthly payment, your potential home loan eligibility could be calculated as 40,32,258 rupees.

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Disclaimer: While FOIR is a crucial factor, banks consider multiple elements when approving home loans. FOIR offers an estimate based on your current financial situation, but other factors also play a role in determining the final loan amount.