When planning to purchase housing with a net monthly salary of 100 thousand rubles, it is not enough to simply find out how much mortgage loan the bank is willing to provide. It is also necessary to ensure that after paying the monthly installments (EMI), the person has enough funds left over to cover housing expenses, investments, unforeseen needs, and achieve other financial goals.
Banks consider many factors when determining creditworthiness, including income, existing loans, credit rating, age, employment, and other financial obligations.
It is recommended that the monthly payment (EMI) does not exceed 40% of the monthly income. Therefore, for an income of 100 thousand rubles, the approximate limit for total EMI is about 40,000 rubles. However, this is not a strict limitation, as the actual possibility depends on personal expenses and other debt obligations.
For example, if a person already has a monthly car loan payment of 10,000 rubles, the budget for a mortgage loan must be adjusted to account for this.
Assuming an annual interest rate of 8% and a repayment period of 20 years, a monthly payment of 30,000 rubles will allow taking out a loan of approximately 3.59 million rubles. With the same payment but a term of 25 years, the loan amount will increase to approximately 3.89 million rubles. Similarly, with an EMI of 35,000 rubles, you can get about 4.18 million rubles over 20 years, and about 4.53 million rubles over 25 years. With a monthly payment of 40,000 rubles, a loan of about 4.78 million rubles is available over 20 years, and about 5.18 million rubles over 25 years.
It is important to note that these calculations are approximate and based on an 8% annual rate; the actual EMI and loan conditions may vary depending on the bank's policy, the borrower's profile, and other conditions.
The key point is understanding the difference between mortgage lending possibilities and the real cost of housing. If your ability to repay the loan is in the range of 30,000–40,000 rubles, you can get a loan of approximately 3.6 to 5.2 million rubles over 20–25 years. However, this does not mean you should buy a house worth that much, as the total price includes the down payment. For example, when buying a house for 4.5 million rubles and getting a mortgage of 3.5 million rubles, the remaining amount must be covered from personal savings. Furthermore, additional funds will be required to pay for stamp duty, registration, documentation, repairs, and other expenses.
Under the current housing lending structure of the Reserve Bank of India (RBI), Loan-to-Value (LTV) ratios are applied. For instance, for an individual residential loan amount exceeding 2 million but up to 7.5 million rubles, an LTV of up to 80% is provided, while for amounts exceeding 7.5 million rubles, the limit is 75%. This means the bank is not obliged to finance the full cost of the property.
Assuming a house value of 50 million rubles and a loan level of about 80%, a loan of approximately 40 million rubles would be required, and the owner would have to contribute about 10 million rubles. However, these 10 million might not be enough, as the buyer must have reserve funds for stamp duty, registration, and other associated costs. According to RBI guidelines, stamp duty, registration, and other documentary fees are generally not included in the property's cost when calculating LTV.
Therefore, a person purchasing a 50 million ruble property cannot make a purchase decision based solely on the down payment amount. With an income of 100 thousand rubles, most of it, about 40%, will go towards the EMI. After that, about 60,000 rubles will remain for utility bills, groceries, children's education, insurance, investments, travel, and medical needs. If the person already has other loans, the financial pressure will increase.
Thus, when determining the housing price for a person with an income of 100 thousand rubles, it is much more important to assess how much money will actually remain after deducting the EMI, rather than just what maximum loan the bank will approve.
A longer loan term reduces the monthly payment but increases the total amount of interest paid. For example, for a loan of 40 million rubles at 8% per annum, the EMI over 20 years will be about 33,500 rubles, whereas over 25 years, this payment will decrease to approximately 30,900 rubles. However, despite the lower monthly payment, a longer term leads to an increase in the total amount of interest paid. Therefore, choosing an excessively long term just to reduce the EMI is not always the optimal strategy; it is better to choose a period based on one's income, age, future expenses, and investment goals.
