If you want to buy a house worth 60 lakh rupees, how much should your salary be? This formula will clear up the confusion..

Home loans have made it easier for the middle class to fulfill their dream of buying a home. This is because buying a house requires a large sum of money, often millions of rupees, which is not possible for everyone to arrange. In such a situation, you can easily fulfill this dream through a home loan. But the question remains: how much home loan should you take?

Many people make their decision based solely on the bank's loan eligibility criteria, which later increases the burden of EMIs. Experts believe that you should always buy a house according to your income and take out only as much loan as you can easily repay from your salary within a reasonable time. Let's say you want to buy a house worth ₹60 lakh, then how much should your salary be, how much home loan should you take, and for what tenure? Here's a formula that will clear up this confusion:

What is this formula?

We are talking about the 3/20/30/40 formula, which financial experts consider perfect for buying a house or property. This formula has been designed to keep your financial health in balance so that the home loan EMI doesn't become a burden on your household budget. Here's what it means:

The total cost of the house you are going to buy should not be more than three times your total annual income.

20 = You should take a loan for a maximum of 20 years. If you take a loan for a shorter period than 20 years, your EMI will be higher. On the other hand, if you choose a period longer than 20 years (like 30 years), your EMI will be lower, but you will have to pay a lot more money to the bank in interest.

30 = This means that your home loan EMI should not exceed 30% of your monthly take-home salary.

40 = At ​​least 40% of the house price should be paid as a down payment from your own pocket. If you can pay more, that's even better.

Now the question is: what salary is required for a ₹60 lakh house? If you want to buy a house worth 60 lakh rupees, according to the formula, your annual income should be at least 20 lakh rupees to afford it (₹20,00,000 x 3 = ₹60,00,000). This means your monthly take-home salary would be 1,66,667 rupees.

Based on a 40% down payment, you would need to arrange 24,00,000 rupees. In this case, you would only need to take out a loan of 36,00,000 rupees.

Let's say you take a home loan of 36,00,000 rupees from a bank for 20 years at an interest rate of 8.5%. Your EMI would be ₹31,242.

According to the formula, the EMI should not exceed 30% of your take-home salary. 30% of 1,66,667 rupees is 50,000 rupees, and your EMI is ₹31,242, which you can easily afford, leaving you with enough money for other expenses and savings. Even if interest rates increase in the future, you shouldn't have any problem paying your EMI.

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