How Much Home Loan Can You Get? How Banks Decide
Banks do not use one national formula to decide a home loan. They test two things, how much of your income can safely go to repayments and how much they are allowed to lend against the property, and they offer the lower of the two answers. Interest rates and policies vary by lender, so the numbers here are illustrations, not quotes.
Limit one: what your income can carry
Lenders usually express this as FOIR, the fixed obligations to income ratio. It is the share of your monthly income that goes to loan repayments and other fixed commitments. HDFC Bank's explainer gives a typical acceptable range of about 40% to 55% and says existing EMIs and credit card payments count towards it.
SBI's FAQ describes a similar test, the EMI to net monthly income ratio, where net income means take-home pay. It says the ratio varies from 20% to 70% depending on the income slab.
The Reserve Bank does not set one ratio. Its capital rules for property loans, which apply from 1 April 2027, require each bank's underwriting policy to test your ability to repay using measures the bank chooses, such as a debt service to income ratio, at levels the bank sets. So the percentage you face is the lender's policy.
Limit two: loan-to-value
The loan-to-value ratio (LTV) is the loan divided by the property value. The Reserve Bank's Credit Facilities Directions for commercial banks, issued in November 2025 and last updated on 1 October 2026, set these ceilings for individual housing loans:
| Loan size | Maximum LTV |
|---|---|
| Up to ₹30 lakh | 90% |
| Above ₹30 lakh, up to ₹75 lakh | 80% |
| Above ₹75 lakh | 75% |
These are ceilings, and a lender may offer less. The same directions tell banks not to count stamp duty, registration and other documentation charges in the cost they finance, except for homes costing up to ₹10 lakh. Those charges come from your own money.
Tenure and age
A longer tenure lowers the EMI, which raises the loan your income can support, but you pay more interest overall. SBI's FAQ says it lends for up to 30 years, to borrowers above 18, with repayment to be completed by age 70. Other lenders set their own limits. Under SBI's rule, a 45-year-old could not take 30 years, because the loan would run past 70.
Worked example: ₹1.5 lakh monthly take-home
Assumptions: take-home pay of ₹1,50,000 a month, an interest rate of 8.5% a year, a 20-year tenure, and a lender that applies FOIR to take-home pay. The rate is for illustration only. Your rate will depend on the lender, your credit record and the loan.
| Case | EMI room | Loan the income supports |
|---|---|---|
| A. FOIR 40%, no other EMIs | ₹60,000 | ₹69.1 lakh |
| B. FOIR 50%, no other EMIs | ₹75,000 | ₹86.4 lakh |
| C. FOIR 50%, existing EMI of ₹20,000 | ₹55,000 | ₹63.4 lakh |
| D. As C, plus a co-applicant with ₹60,000 take-home | ₹85,000 | ₹98.0 lakh |
In case D, the combined take-home is ₹2.1 lakh. Half of that is ₹1.05 lakh, less the ₹20,000 existing EMI.
Now apply the second limit. For a ₹1 crore flat, a 75% LTV caps the loan at ₹75 lakh. In cases B and D the property limit binds, because income would allow more than the bank may lend. In cases A and C income is the limit. A ₹75 lakh loan at these assumptions has an EMI of about ₹65,000, which is 43% of take-home pay. The remaining ₹25 lakh, plus stamp duty and registration, must come from you.
Lengthening the tenure changes case A. At 8.5%, an EMI of ₹60,000 supports about ₹74.5 lakh over 25 years and ₹78.0 lakh over 30 years, against ₹69.1 lakh over 20 years.
How co-applicants and existing EMIs change the result
- Existing EMIs use up the same ratio. At these assumptions, every ₹1,000 of existing monthly EMI reduces the loan you qualify for by about ₹1.15 lakh. Credit card payments count too.
- A co-applicant's income can be added. SBI's FAQ says salaries can be clubbed and that a co-applicant can raise the loan amount. Their own EMIs and credit history come into the calculation as well.
Tax basics: interest and principal
The Income-tax Act, 2025 applies from the tax year that began on 1 April 2026. Under it, home loan interest is deducted under section 22(1)(b), which replaces section 24(b) of the 1961 Act, and the ₹2 lakh limit for a home you live in is in section 22(2). Principal repaid counts towards the ₹1.5 lakh limit in section 123, which replaces section 80C. Returns for income earned up to 31 March 2026 still use the 1961 Act's numbers.
| Old regime | New regime | |
|---|---|---|
| Interest on a loan for a home you live in | Up to ₹2 lakh a year | Not allowed |
| Interest on a let-out home | Actual interest. A loss can be set off against other income up to ₹2 lakh, with the rest carried forward | Actual interest against rent. A loss cannot be set off or carried forward |
| Principal repaid (section 123) | Counts within the ₹1.5 lakh overall limit shared with provident fund, insurance and similar items | Not available |
The ₹2 lakh limit applies if the purchase or construction is completed within five years from the end of the tax year in which you borrowed, and you have an interest certificate from the lender. Otherwise the limit is ₹30,000. Interest for the period before the tax year in which the home is bought or built is deducted in five equal instalments, starting from that year.
Which regime suits you depends on your income and other deductions. A chartered accountant can compare them.
Rates and terms vary
SBI's FAQ says its floating-rate home loans are linked to the repo rate and reset as per the bank's guidelines. Other lenders use their own benchmarks and spreads. Compare the interest rate, how it resets, fees and the sanction letter itself before choosing.
Key points
- Banks offer the lower of two limits: what your income can carry, and what RBI's loan-to-value ceilings allow for the property.
- Lenders set their own EMI-to-income limit, often around 40% to 55%. Existing EMIs and credit card payments reduce the loan you qualify for.
- A longer tenure and a co-applicant's income can raise eligibility, but a longer tenure costs more interest.
- Stamp duty and registration are not financed by the bank, so keep that cash ready.
- Under the Income-tax Act, 2025, interest on a home you live in (section 22) and principal repaid (section 123) reduce tax only under the old regime.
Sources
- https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13156
- https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13399
- https://homeloans.sbi.bank.in/faq
- https://www.hdfc.bank.in/blogs/personal-loan/what-is-foir-does-it-affect-your-personal-loan-approval
- https://www.incometaxindia.gov.in/w/section-22-211
- https://www.incometaxindia.gov.in/w/section-123-96
- https://www.incometaxindia.gov.in/w/section-202-76
- https://www.incometaxindia.gov.in/w/income-from-house-property
- https://www.incometaxindia.gov.in/w/deductions-allowable-to-tax-payer
- https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
- https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs
- https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/set-offcarry-forward-losses
This guide is general information, not legal, tax or financial advice. Rules and rates change; check with a lawyer, chartered accountant or your bank before you decide.