The number a bank will lend you and the number you can comfortably repay are two different quantities, and confusing them is how households end up house-poor. A lender is solving for the largest loan its risk model tolerates. You should be solving for the largest loan that leaves the rest of your financial life intact. Those answers are rarely the same, and the gap is the whole subject of this guide.
What the bank is actually calculating
Two constraints bind, and the smaller one wins.
FOIR — the income test. Fixed Obligations to Income Ratio: the share of your monthly income already committed to EMIs, plus the new one. Lenders typically cap the total somewhere around 40-55% of net monthly income, sliding with income — a higher earner is allowed a higher ratio, because what is left after the EMI still covers a life.
Crucially, existing EMIs are subtracted first. A car loan and a personal loan do not merely reduce your eligibility, they reduce it by their full EMI against the cap. Clearing a small loan before applying often raises eligibility by far more than the loan's balance.
LTV — the collateral test. Loan to Value: the share of the property's value the bank will lend against, capped by regulation in bands that tighten as the property gets more expensive. This is what sets your down payment, and it is why the cash you need is not negotiable however good your income looks.
The home loan eligibility calculator applies both and reports the binding one, which is the number that matters — knowing which constraint binds tells you what would actually change the answer.
Also in the model: your credit score, which moves the rate more than the amount; your age, because the tenure cannot run far past retirement; and whether income is salaried or self-employed, where lenders underwrite on declared profits and want more years of history.
The gap between eligible and affordable
Assume the bank approves its maximum. Four costs sit outside that number:
The down payment is only part of the cash. Stamp duty and registration, brokerage, and the legal and processing fees are all payable in cash on top of the down payment, and none of them can be borrowed.
The EMI is not the cost of the house. Maintenance, property tax, insurance and repairs are permanent, and they scale with the property.
The emergency reserve must survive the purchase. Emptying it into a down payment converts every future setback into a credit event. That reserve is non-negotiable, and where it should sit is in the emergency fund.
Your other goals keep their claims. Retirement and education do not pause because you bought a house. A maximum-eligibility EMI usually means those goals get funded out of whatever is left, which is the definition of an unplanned portfolio.
A defensible discipline: borrow toward the ratio you can still save at, not the ratio the bank permits. If the approved EMI leaves nothing for the SIP funding your other goals, the loan is too big whatever the sanction letter says.
Before you even get here
Eligibility answers "how much can I borrow". It does not answer "should I buy", which is a different calculation entirely and comes first — rent vs buy runs it honestly, including the leg most comparisons omit, where the renter invests the difference. And if you are weighing a surplus against an existing loan, prepay, refinance or invest is the sequel.
⚠️ FOIR bands, LTV caps and the tax treatment of home-loan interest and principal are set by lenders and by regulation, and change. Verify current terms with the lender — WealthTicker is not a SEBI-registered investment adviser.
Key takeaway
A bank sizes your loan by the smaller of two tests: FOIR, which caps total EMIs as a share of income and subtracts existing loans in full, and LTV, which caps the loan against the property's value and therefore sets your down payment. Neither test asks what you can afford. Stamp duty, maintenance, an intact emergency reserve and your other goals all sit outside the sanctioned number — so borrow toward the EMI you can still save alongside, not the one you were approved for.
More in Module 11 — Money beyond funds: salary, tax, loans and property
Decoding your CTC: why in-hand is so much less
Cost to company is what employing you costs, not what you are paid. The four layers inside a CTC, where EPF and gratuity actually go, and the basic-salary split that silently sets three benefits at once.
Old vs new tax regime: the choice that decides everything else
The new regime is the default and usually the winner — but not always. Where the break-even sits, why the §87A rebate never touches capital gains, and why the regime decides whether ELSS, HRA and 80D planning are worth anything at all.
Advance tax and TDS: how India collects before you file
TDS is a running prepayment, not the final bill, and advance tax fills the gap in four dated instalments. The 15/45/75/100 calendar, the cliff in the early triggers, and the presumptive shortcut that collapses it to one March payment.
ESOPs, RSUs and ESPPs: taxed twice, at two different prices
Slab tax on the discount when shares become yours, capital gains from that day's FMV when you sell. Why tax can fall due on paper value, and why the cost-basis error is the most common mistake in self-filed returns with equity comp.
Freelancing full-time: the 50% deal most professionals miss
Presumptive taxation lets a qualifying professional declare half of gross receipts as profit — no books, no audit, one advance-tax instalment. How the scheme works, and how to compare a salary and a freelance offer honestly.
How an EMI actually works (and the flat-rate trick)
Interest on the outstanding balance first, principal with the remainder — so early years barely repay anything. Why tenure sets total interest, why early prepayment punches above its weight, and why a flat rate is roughly double what it claims.
A surplus and a loan: prepay, refinance or invest?
Prepayment is a guaranteed, tax-free return equal to your loan rate — cut the tenure, not the EMI. When a balance transfer clears its fees, and when investing the surplus honestly beats both.
Rent vs buy: the honest math
Terminal net worth on two fully-specified paths, with the renter investing every rupee the buyer sinks. The two assumptions that decide the answer, and the tax change that flipped older calculators' verdicts.
The small savings family: PPF, SSY, NSC, KVP, SCSS and kin
One sovereign family, priced quarterly. Which schemes compound, which pay income, which are tax-exempt — and why the after-tax yield, not the poster rate, is the number to compare.
Insurance is not an investment: term plans and the LIC question
Bundled policies do both jobs badly. Sizing a term cover from needs rather than folklore, and evaluating an endowment you already own on forward numbers alone — surrender, paid-up or continue.
What trading actually costs: beyond zero brokerage
STT, exchange charges, GST, stamp duty and DP fees stack on every trade no broker can waive. The break-even move to know before a trade, the averaging-down trap, and what leverage really multiplies.
Running a small business by the numbers
Break-even and the margin of safety, margin versus markup, the cash conversion cycle, the DSCR a lender will compute anyway, and GST as an input-credit chain — the five checks that catch trouble early.
Section 80C: the whole ₹1.5 lakh menu, not just ELSS
A shared ceiling, not a product — and EPF, home-loan principal and tuition fees may already fill it. Count the headroom before you buy anything to fill it with.
Section 80D: two buckets, and the cash rule that voids most claims
₹25,000 for your family and another ₹25,000 for your parents, each rising to ₹50,000 at 60 — with the check-up allowance inside those limits.
HRA exemption: the least of three numbers, and which one binds
Actual HRA, rent minus 10% of basic, or 50/40% of basic — all keyed to basic salary rather than CTC, and all available only under the old regime.
Property capital gains: what actually changed when indexation went
Bought before 23 July 2024, a resident pays the lower of 12.5% flat and 20% indexed — but that relief caps the tax payable, not the gain itself.
Education loans and Section 80E: the deduction with no ceiling
Uncapped on interest, but only for eight years from the year repayment starts — so the window, not the amount, is the constraint that should set your tenure.