Bank usually assess your capacity to be able to repay the loan when deciding the home loan eligibility. Banks also generally fix an upper age limit for home loan applicants.
Capacity to repay is based on your
- Monthly disposable / surplus income, (which is dependent on factors such as total monthly income / surplus less monthly expenses)
Other factors like
- spouse’s income,
- stability of income etc.
Banks usually want to make sure that you easily repay the loan on the right time and ensure end use. The higher the monthly disposable income, higher will be the amount you will be eligible for loan.
A bank would usually assume that about 55-60 % of your monthly disposable / surplus income is what you can use to repay the EMI of the loan. However, some banks maycalculate the income available for EMI payments based on your gross income and not on your disposable income.
The amount of the loan depends on the tenure of the loan and the rate of interest also as these variables determine your monthly outgo / outflow which in turn depends on your disposable income.
This information is as provided by the RBI