Using the home loan eligibility calculator – the steps you need to follow

The home loan eligibility calculator is a quick online tool that helps you determine whether a bank or an HFC will grant your request to purchase your dream home. This online calculator is available on all lender websites. As a borrower, you can use this simple tool to calculate your eligibility before you approach the lender. The tool helps you understand the exact amount you will have to pay in EMIs, if your loan is approved. Also, since it is a freely available tool, you can use it numerous times, until you arrive at a comfortable EMI amount. Using the eligibility calculator is rather easy.

Here’s how you can check home loan eligibility.

Step 1 – Enter your income figure

The home loan eligibility calculator comprises of 4 basic tabs, with the income tab being the first one. It is in this tab that you need to enter your monthly income. Remember to enter your income figure after all the mandatory deductions i.e. your provident fund contribution, tax deducted at source (TDS) and your professional tax. Basically, you need to input your net or in-hand monthly income in the income figure tab. This enables you to accurately compute the payable EMI.

Step 2 – Enter the interest rate you would prefer against the loan

All lenders mention the minimum and maximum interest rate offered against home loans. Lenders cannot sanction home loans below the MCLR as mandated by the RBI. If you use the calculator on your chosen lender’s website, you will automatically find the minimum and maximum lending rate. You may need to select it from the drop down menu, enter it manually, or adjust the cursor on the interest rate scale. However, you need to remember that your bank may offer a different interest rate when you actually apply for the loan.

Step 3 – Enter the tenure of the loan

You must now enter your preferred loan tenure to calculate your home loan eligibility. Different lenders offer different minimum and maximum tenures. While some lenders provide loans for up to 20 years, a few also provide 30 year tenures. But you must remember that higher tenures can decrease your EMI, but your interest rates my increase, thus increasing the overall value of your loan.

Step 4 – Enter the figure of other EMIs you are paying

This is the fourth and the last tab in the home loan eligibility calculator. Here, you must enter the total amount of other EMIs you are paying. For instance, if you have a car loan and a personal loan and are paying EMIs of ₹15,000 and ₹5,000 per month, respectively; you must enter ₹20,000 in the other EMIs tab. This helps the bank know that you are already paying off one or more loans and that a certain portion of your net income is dedicated towards the payment of other EMIs.

Step 5 – Calculate the EMI and repeat

Once you have entered all the figures in the four tabs, you can check your home loan eligibility. The loan eligibility calculator will instantly compute the principal loan amount you are eligible for and the EMI payable. However, if you find the computed EMI amount high, you can readjust the interest rate and tenure and enter new figures. Note that doing this may reduce the principal loan amount offered by the lender.

So, before you apply for home loan, ensure you check out this calculator. You must note that most lenders have a thumb rule that states that you can only use 40%-50% of your income towards EMI payments.