How much Home Loan Should I Take? A Budget and EMI Guide

You should take a home loan amount that covers your eligible property-financing requirement while keeping monthly repayments within your sustainable budget.

• Start with your net monthly income, essential expenses, existing EMIs and planned savings.
• Calculate the property price minus the down payment you can make without using emergency savings.
• Your affordable EMI and the lender's approved EMI capacity may differ.
• At an illustrative 7.50% annual interest rate, a Rs. 40 lakh home loan over 20 years has an EMI of approximately Rs. 32,224.
• Extending the same loan to 30 years reduces the EMI to approximately Rs. 27,969 but increases total interest.
• Include stamp duty, registration expenses and other purchase costs in your budget.

Check your repayment capacity before choosing a property or accepting a loan offer. You can also check your Bajaj Finance Home Loan eligibility to understand your available borrowing options.

You should borrow the amount required for an eligible property purchase or construction, provided the EMI fits comfortably within your monthly budget.

The largest loan amount you qualify for is not automatically the right amount to borrow. Your decision should satisfy two conditions:

1. The loan should cover the funding gap after your down payment.
2. The EMI should leave enough income for regular expenses, savings and unexpected needs.

For example, you might qualify for a Rs. 50 lakh home loan but need only Rs. 40 lakh to purchase your chosen property. Borrowing the additional Rs. 10 lakh would increase your debt and interest costs without necessarily serving a useful purpose.

Start by calculating the amount you need to borrow, then check whether the EMI fits your household budget.

You can estimate an affordable loan amount by identifying how much EMI you can pay each month without compromising essential expenses and planned savings.

Affordable EMI = Net monthly income − Essential expenses − Existing EMIs − Planned savings and financial buffer

The result indicates your available monthly capacity, not an automatic recommendation to use the entire amount.

Example: Calculating a home loan budget

Consider Rahul, a 32-year-old salaried professional in Pune. He has a CIBIL Score of 760 and earns Rs. 1.20 lakh per month after tax.

Rahul has an indicative monthly budget of Rs. 40,000 for his new home loan. This example assumes his stated household expenses do not include rent that would cease after moving into the purchased home.

In practice, Rahul should also account for property maintenance, insurance, travel and future family expenses. The lender will conduct its own affordability assessment, which may produce a different result.

Salary is an important factor in home loan eligibility, but lenders also assess existing borrowing, credit history, age and employment stability. As a result, two people earning the same amount may qualify for different loan amounts.

For example, someone earning Rs. 1 lakh per month with no existing EMIs has more available repayment capacity than someone paying Rs. 35,000 towards other loans. Lenders may consider the Fixed Obligation to Income Ratio (FOIR) or a similar measure to assess repayment capacity.

FOIR = Total monthly fixed financial obligations ÷ Eligible monthly income × 100

The exact income definition, obligations and acceptable FOIR depend on the lender's policy.

A lender's assessment should not replace your own budget. Even if your application is approved, consider whether the proposed EMI leaves enough financial flexibility.

Your down payment is the portion of the property purchase price you pay from your own funds. A higher down payment reduces the amount you need to borrow, but it also uses more of your available savings.

Example: Buying a Rs. 60 lakh home

Rahul is considering a residential property priced at Rs. 60 lakh.

These amounts illustrate the funding gap before fees and transaction costs; they are not guaranteed financing percentages. The lender determines the applicable maximum loan-to-value (LTV) ratio based on regulatory requirements and its lending policy.

Rahul should also avoid using all his savings for the down payment. If he has Rs. 18 lakh in savings but needs Rs. 4 lakh for emergency reserves and transaction expenses, the amount immediately available for the down payment is lower.

This helps prevent a common problem: having enough money for the down payment but insufficient funds for registration and moving costs.

The property price is not always the total amount you need to arrange to complete a home purchase. Additional expenses depend on the location, property type and transaction.

For example, if Rahul agrees to pay Rs. 60 lakh for a property, he should calculate the applicable government charges before deciding how much of his savings can go towards the down payment. He should also avoid assuming that the lender will finance every purchase-related expense.

Stamp duty and registration requirements vary by state, and the applicable fees depend on the transaction.

The interest rate determines the EMI payable for a given loan amount and tenure. A higher rate increases the EMI, while a lower rate reduces it, assuming other factors remain unchanged.

Example: EMI for a Rs. 40 lakh home loan

These figures assume monthly reducing-balance repayment at a constant interest rate and exclude fees. A floating interest rate can change during repayment, so the initial EMI may not remain the same throughout the tenure.

Rahul's Rs. 40,000 EMI budget can accommodate the illustrated Rs. 40 lakh loan at 7.50% per annum. However, this does not mean he should borrow more simply to use the full budget. Keeping some EMI capacity unused provides room for future rate increases and unexpected financial needs.

Bajaj Finance Home Loan interest rates start from 7.50% p.a.* for eligible salaried applicants, subject to the applicable offer and eligibility. You can check your Bajaj Finance Home Loan eligibility to understand the amount you may qualify for before choosing a repayment plan.

Source: Bajaj Finance Home Loan interest rates.

A longer tenure lowers the EMI but increases the total interest paid when the loan amount and interest rate remain unchanged. For Rahul's Rs. 40 lakh home loan, consider a constant interest rate of 7.50% per annum.

The figures are illustrative and exclude fees.

Choosing a 30-year tenure instead of 20 years reduces the monthly EMI by approximately Rs. 4,255 but increases the total interest by approximately Rs. 23.35 lakh, assuming the rate remains unchanged throughout both tenures.

Rahul should balance affordability today with the total repayment cost. A shorter tenure can reduce interest but leave less room for unexpected expenses, while a longer tenure can improve monthly cash flow. However, don't use a longer tenure to justify borrowing more than necessary.

You can calculate an equated monthly instalment (EMI) using the loan amount, monthly interest rate and number of monthly repayments.

The standard reducing-balance EMI formula is: EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1]

Where:

• P: Loan principal.
• R: Monthly interest rate, calculated as the annual interest rate divided by 12.
• N: Total number of monthly repayments.

For Rahul's Rs. 40 lakh loan at 7.50% per annum over 20 years:

• P = Rs. 40,00,000
• R = 7.50% ÷ 12 = 0.00625
• N = 20 × 12 = 240 months

Applying these values gives a monthly EMI of approximately Rs. 32,224.

You can use the Bajaj Finance Home Loan EMI calculator to compare different loan amounts, interest rates and tenures. An EMI calculation helps estimate repayment commitments, but it does not determine whether the lender will approve the proposed loan amount.

No. The maximum amount a lender is willing to approve may exceed the amount you need or can comfortably repay.

For example, Rahul has an indicative EMI budget of Rs. 40,000. He can compare the EMI for Rs. 40 lakh, Rs. 45 lakh and Rs. 50 lakh over 20 years at 7.50% per annum.

Borrowing Rs. 50 lakh would exceed Rahul's indicative EMI budget, while even Rs. 45 lakh would leave less financial room than Rs. 40 lakh.

If the property costs Rs. 60 lakh and Rahul can contribute Rs. 20 lakh, borrowing Rs. 40 lakh meets his financing requirement. Borrowing more than necessary would increase his debt and may not be permitted under the home loan's purpose and disbursement conditions.

The suitable loan amount should reflect the actual property-financing requirement and affordable repayment capacity, not simply the largest available offer.

Your home loan should leave room for essential expenses, emergency savings and financial commitments that may arise during the repayment period. A loan lasting 20 or 30 years can overlap with career changes, children’s education and retirement planning, so Rahul should consider how his repayment budget would hold up if his income fell or household expenses increased.

For example, taking a larger loan because his current salary supports it could become difficult if he later needs to support dependants.

Before choosing the loan amount, consider:

• Whether you will have emergency savings left after paying the down payment.
• Whether the EMI remains affordable without a future salary increase.
• Whether upcoming education or family expenses could affect repayment capacity.
• Whether floating-rate changes could increase monthly payments.
• Whether you intend to make eligible part-prepayments.

The objective is not to eliminate all financial pressure but to avoid relying on uncertain future earnings to meet essential repayments.

Compare the annual percentage rate (APR), EMI, total interest, repayment tenure and applicable charges before choosing a home loan. The advertised starting interest rate alone does not establish the total borrowing cost.

Bajaj Finance offers home loans of up to Rs. 15 crore*, with tenures of up to 32 years, subject to eligibility. Eligible salaried applicants can access starting interest rates from 7.50% p.a.*, while the actual rate depends on the approved offer.

Individual borrowers with qualifying floating-rate loans for non-business purposes are not charged foreclosure or part-prepayment fees, subject to the applicable product terms.

Sources: Bajaj Finance Home Loan; Home loan interest rates and charges.

Terms and conditions apply. 

Start by calculating the property-financing gap after your down payment and other available funds. Then, identify a monthly EMI that does not compromise essential expenses, savings or emergency reserves.

Use an EMI calculator to compare borrowing amounts and repayment tenures, and check how higher floating interest rates could affect your budget before finalising the loan amount.

Bajaj Finance assesses income, credit profile, repayment capacity and property details when evaluating home loan applications. If you are planning to purchase a residential property, check your Bajaj Finance Home Loan eligibility to understand the amount you may qualify for before making a borrowing decision.