25, 50 or 75 lakh, how much home loan to take and how much EMI to keep as per your salary..

Home Buying Tips: Buying a house is a big deal for the middle class because it is not easy to pay a hefty amount for a house with a simple income. This is the reason why people often complete this task by taking a home loan. Many times, people buy expensive houses in the pursuit of buying a good house. For this, they either spend all their savings or take so much loan that it is not easy to pay the EMI for a long time.

In such a situation, later, when the difficulties increase, there is regret. But if you move forward with planning and a little math, then you can avoid making this mistake. Here we are telling you such a smart and effective formula through which you can easily find out how expensive a house you should buy according to your salary, how much down payment you should pay, and how much loan you should take. If you adopt this formula, then your house requirements will also be easily fulfilled, and you will never regret your decision.

This special formula will work.

Financial planners often advise home buyers to adopt a simple rule. These rules are 3/20/30/40. Let's understand each part of this formula in simple language.

1. Rule '3': The price of the house should be 3 times your annual salary

In this formula, '3' means that the total price of the house you are going to buy should not be more than three times your total annual income.

Example: If the combined annual package of you and your spouse is Rs 10 lakh, then you should look for a house up to Rs 30 lakh. If your annual package is Rs 25 lakh, then you can plan to buy a house up to Rs 75 lakh.

Why is this important?

This rule ensures that you do not buy a house beyond your financial capacity. This will not burden you with unnecessary debt.

2. Rule '20': Keep the loan tenure to a maximum of 20 years

'20' in the formula refers to the loan tenure. Banks can give you a home loan for 25 or 30 years as well, but experts recommend choosing a maximum tenure of 20 years.

Why is this important?

If you take a loan for a tenure of less than 20 years, your EMI will be very high. On the other hand, if you choose a tenure of more than 20 years (eg, 30 years), your EMI will be reduced, but you will have to pay a lot of money to the bank in the form of interest. 20 years is a period in which EMI is also managed, and you also avoid paying too much interest to the bank.

3. Rule '30': EMI should not be more than 30% of your monthly salary

The '30' part of the formula is the most important. This means that your home loan EMI should not exceed 30% of your monthly in-hand salary.

Example: If your monthly salary is Rs 70,000, then your home loan EMI should not exceed Rs 21,000 under any circumstances. If it is less than this, it is even better.

Why is this important?

Your salary is not just for paying EMI. You also have to look after other household expenses, children's fees, medical emergencies, investments, and your savings. If the EMI is up to 30%, then you will be able to easily fulfill the rest of the needs.

4. Rule '40': Target 40% for down payment

'40' in the formula means down payment. Although banks ask for a 10-20% down payment of the property price, you should try to arrange at least 40% down payment.

Example: Suppose you have chosen a house worth 30 lakhs for your annual income of 10 lakhs. So you should make a down payment of around 12 lakhs at the rate of 40%. This will result in you taking a loan of only 18 lakhs.

Why is this important?
The higher the down payment you make, the lower the loan amount you will have to take. With a lower loan amount, your EMI will also be less and you will save lakhs of rupees in the form of interest.

Let us understand the whole math with an example
Suppose, your monthly in-hand salary is ₹75,000.
Annual income: ₹75,000 x 12 = ₹9,00,000
How much house to buy (Rule 3): ₹9 lakhs x 3 = up to ₹27 lakhs.

How much down payment to make (Rule 40): 40% of ₹27 lakh = ₹10.8 lakh

How much loan to take: ₹27 lakh - ₹10.8 lakh = ₹16.2 lakh

Term (Rule 20): 20 years

What will be the EMI: If you take a loan of ₹16.2 lakh for 20 years at an interest rate of 9.55%, your EMI will be around ₹15,153.

What is the right EMI (Rule 30): Your salary is ₹75,000. 30% of this is ₹22,500. Your EMI (₹15,153) is well within this limit. This means you can pay this EMI without any stress and have enough money left for other expenses and savings.

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