How to decide home loan amount you should take
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2 Comments
Satish Rawat(Age 33) is working with a MNC in Mumbai. His net take home salary is Rs. 1,00,000/- per month. He wants to buy a home of worth 60 lacs. He wants to take a home loan for as much loan amount as possible. He has a saving of Rs. 11 lacs only.
Analysis
EMI Eligibility – Table 1
% eligibility of your net take home salary Max EMI Eligibility HDFC 60% – 65% Rs. 65000/- IDBI 65% – 70% Rs. 70000/- Axis bank 60% – 65% Rs. 65000/- ING Vysya 55% – 60% Rs. 60000/- Loan Amount Eligibility as per Satish’s salary – Table 2
Interest Rate 10 Years 15 Years 20 Years HDFC
(Fixed for 2 years)8.25% 53 lacs 67 lacs 76 lacs IDBI
(Fixed for 2 years)8.25% 57 lacs 72 lacs 82 lacs Axis Bank 14% 42 lacs 49 lacs 52 lacs ING Vysya
(Fixed for 2 years)8.25% 49 lacs 62 lacs 70 lacs Pre-payment charges – Table 3
HDFC 1.5% for all cases (self, Refinance) IDBI 0% (self finance), 2% (Refinance) Axis 0% for all cases ING Vysya 0% (self finance), 2% (Refinance) Loan to Value ratio is 85% for all the banks, thereby 15% of the total property value has to be paid by the customer.
Rupeetalk’s Recommendation
Total Cost of Property 60 lacs Maximum Loan he can avail (85% of total property value) 51 lacs EMI Calculation basis 51 lacs of home loan – Table 4
Interest Rate EMI
(10 Years)EMI
(15 Years)EMI
(20 Years)HDFC 8.25% Rs. 62553/- Rs. 49477/- Rs. 43455/- IDBI 8.25% Rs. 62553/- Rs. 49477/- Rs. 43455/- Axis Bank 14% *Not Eligible *Not Eligible Rs. 63420/- ING Vysya 8.25% *Not Eligible Rs. 49477/- Rs. 43455/- * Refer table 2, which explains that Satish is not eligible for 51 lacs of home loan from those banks.
Since Satish can afford an EMI of Rs. 62553/- easily, so we recommend satish to take a home loan for 51 lacs for 10 years from or IDBI Bank because of- Lower term loans will clear off soon
- Lower fixed cum floating interest rate is being offered by the bank
- Pre-payment charge for IDBI is lower in case of self- finance.
- Processing fee is same for all these banks at around 0.5% negotiable
Published on May 6, 2010 · Filed under: Home Loan Case Studies; Tagged as: home loan, home loan prepayment, invest in property, loan transfer
2 Responses to “How to decide home loan amount you should take”
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pushkar said on July 6th, 2010 at 4:10 pm
we never get to know our exact eligibility and hence pay extra amt to banks for that. even after giving complete set of docs to ICICI , i did not get my eligibility…they returned back my documents . same with ING ( they even deducted processing fee also). totaly confused i stoped dreaming of buying a house. i think this article help…but i want my exact eligibility…how?? Kindly mail me any detailed spreadsheet , you have for the same.
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Chetan Agrawal said on August 14th, 2010 at 4:18 pm
the above case study looks abstract. 62% of salary can never be considered by any bank for EMI calculation. max to max 45% is considered fr loan eligibility.
dear pushkar – 1) try negotiating with banks on CIBIL report on your credit worthiness. i have not yet done this, but i intend to do so, and i in process of getting my report. 2) in all possibilities, buying a home on loan is not at all a bad idea, unless you are not taking 70%+ loan.
i am sure you must have done your mathematics, also.
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