Home Affordability Calculator
Find out how much house you can afford based on your income, debts, and savings.
Enter your details to calculate how much house you can afford
Determining how much house you can afford is a crucial first step in the home buying process. Our Home Affordability Calculator helps you understand your buying power by analyzing your income, debts, down payment, and other factors that impact your ability to purchase a home.
The calculator uses financial principles like the debt-to-income ratio (DTI) and the 28/36 rule to estimate a home price that aligns with your financial situation. The 28/36 rule suggests that you should spend no more than 28% of your gross monthly income on housing expenses and no more than 36% on total debt payments.
Understanding your home affordability helps you set realistic expectations, focus your home search on properties within your budget, and prepare financially for the home buying process. It also helps you plan for additional costs beyond the mortgage, such as property taxes, insurance, and maintenance.
Case Study 1: Ramesh - High Income, High Debt
Financial Profile:
- Annual Income: ₹24,00,000 (₹2,00,000 per month)
- Monthly Debt: ₹60,000 (car loan, personal loan, credit cards)
- Down Payment: 20% saved
- Interest Rate: 8.5%
- Loan Term: 20 years
Ramesh has a high income but also significant existing debt obligations. Using the 28/36 rule:
- Maximum housing payment (28% rule): ₹56,000 per month
- Maximum total debt payment (36% rule): ₹72,000 per month
- Available for mortgage after existing debt: ₹12,000 per month
Despite his high income, Ramesh's high debt significantly reduces his home buying power. The calculator shows he can afford a home priced at approximately ₹80.00L, much less than he expected.
Recommendation: Ramesh should focus on paying down his existing debt before buying a home to increase his affordability by 3-4 times.
Case Study 2: Suresh - Moderate Income, Low Debt
Financial Profile:
- Annual Income: ₹12,00,000 (₹1,00,000 per month)
- Monthly Debt: ₹5,000 (small personal loan)
- Down Payment: 15% saved
- Interest Rate: 7.5%
- Loan Term: 25 years
Suresh has a moderate income but minimal existing debt. Using the 28/36 rule:
- Maximum housing payment (28% rule): ₹28,000 per month
- Maximum total debt payment (36% rule): ₹36,000 per month
- Available for mortgage after existing debt: ₹31,000 per month
With low debt and a longer loan term, Suresh can afford a home priced at approximately ₹6.50Cr, which is more than 5 times his annual income.
Recommendation: Suresh is in a good position to buy a home, but should maintain an emergency fund of at least 6 months of expenses in addition to his down payment.
Case Study 3: Ramesh and Suresh as Co-Applicants
Combined Financial Profile:
- Combined Annual Income: ₹36,00,000 (₹3,00,000 per month)
- Combined Monthly Debt: ₹65,000
- Down Payment: 25% saved
- Interest Rate: 7.2%
- Loan Term: 20 years
Ramesh and Suresh decide to apply together as co-borrowers. Using the 28/36 rule:
- Maximum housing payment (28% rule): ₹84,000 per month
- Maximum total debt payment (36% rule): ₹1,08,000 per month
- Available for mortgage after existing debt: ₹43,000 per month
By combining their resources, they can afford a home priced at approximately ₹13.00Cr, allowing them to consider properties in premium neighborhoods with better amenities.
Recommendation: Co-borrowing significantly increases buying power, but requires trust and clear understanding of shared financial responsibilities.
- Improve your credit score: A higher credit score can help you qualify for better interest rates, increasing your buying power.
Example: Suresh improved his CIBIL score from 720 to 800 by paying bills on time and reducing credit utilization, reducing his interest rate from 8.5% to 7.5%, saving ₹3,400 monthly on a ₹60L loan.
- Pay down existing debt: Reducing your monthly debt obligations can significantly improve your debt-to-income ratio.
Example: Ramesh paid off his ₹8L car loan before applying for a home loan, freeing up ₹18,000 monthly. This increased his home buying power by approximately ₹25L.
- Save for a larger down payment: A bigger down payment reduces your loan amount and may help you avoid private mortgage insurance.
Calculation: Increasing down payment from 10% to 20% on a ₹80L property reduces the loan amount by ₹8L and monthly payments by approximately ₹7,000.
- Consider a longer loan term: While you'll pay more interest over time, a longer term reduces your monthly payment and can help you qualify for a larger loan.
Example: Extending a ₹50L loan from 20 to 30 years reduces monthly payments from ₹41,800 to ₹36,700, increasing buying power by approximately ₹7L.
- Explore different loan types: Different loan programs have varying requirements and may offer better terms based on your situation.
Options: Regular home loans (8-9%), affordable housing loans (6.5-7.5%), balance transfer options (0.5-1% lower than current rate), and special programs for women homebuyers (0.05-0.1% concession).
- Increase your income: A higher income improves your debt-to-income ratio and buying power.
Strategy: Suresh took on freelance work increasing his monthly income by ₹25,000, which improved his buying power by approximately ₹30L.
- Look for homes in more affordable areas: Property values vary significantly by location; expanding your search area can increase your options.
Comparison: Ramesh found equivalent 3BHK apartments priced at ₹1.8Cr in the city center, ₹1.2Cr in established suburbs, and ₹85L in emerging suburbs with upcoming infrastructure projects.
- Consider a co-borrower: Adding a family member or partner to the loan application can increase your buying power if they have good credit and income.
Case Study: Ramesh and his spouse combined their incomes (₹2L + ₹1.5L monthly) to qualify for a ₹2.7Cr property that neither could afford individually.
- Take advantage of government schemes: Programs like PMAY offer benefits like interest subsidies and tax benefits.
Benefits: Under PMAY-CLSS, Suresh (annual income ₹12L) qualified for an interest subsidy of 4% on a loan of ₹9L, saving approximately ₹2.35L over 20 years.
- Time your purchase strategically: Consider market conditions, interest rate trends, and seasonal promotions.
Timing: Ramesh negotiated a 5% discount during the festive season, saving ₹4L on an ₹80L property, and locked in a favorable interest rate before an anticipated rate hike.
Regional Price Variations
The Indian housing market varies significantly across different cities and regions. Metropolitan areas like Mumbai, Delhi, and Bangalore typically have higher property prices compared to tier-2 and tier-3 cities. However, these areas also often offer better amenities, infrastructure, and employment opportunities.
| City | Average Price (₹/sq.ft.) | 2BHK Apartment Cost |
|---|---|---|
| Mumbai (South/Central) | ₹25,000-45,000 | ₹2.5Cr-4.5Cr |
| Bangalore (Central) | ₹12,000-20,000 | ₹1.2Cr-2Cr |
| Delhi NCR | ₹5,500-15,000 | ₹55L-1.5Cr |
| Pune | ₹6,000-12,000 | ₹60L-1.2Cr |
| Tier-2 Cities (Avg.) | ₹3,500-7,000 | ₹35L-70L |
Financing Options & Government Initiatives
Home loan interest rates in India typically range from 6.5% to 9.5%, depending on the lender, loan amount, tenure, and the borrower's credit profile. Various government initiatives, such as the Pradhan Mantri Awas Yojana (PMAY) and tax benefits under Section 80C and 24(b) of the Income Tax Act, aim to make home ownership more accessible.
- PMAY Credit-Linked Subsidy Scheme (CLSS): Interest subsidy of 3-6.5% for first-time homebuyers based on income category
- Section 80C deductions: Up to ₹1.5L for principal repayment of home loan
- Section 24(b) deductions: Up to ₹2L for interest paid on home loans
- First-time homebuyer additional deduction: Extra ₹1.5L under Section 80EEA for properties valued up to ₹45L
- Special women homebuyer schemes: Reduced stamp duty (typically 1-2% lower) in many states and interest rate concessions
Market Trends & Future Outlook
When buying a home in India, it's important to consider factors like RERA compliance, builder reputation, location potential, connectivity, and amenities. Proper due diligence, including title verification and property inspection, is essential before finalizing any purchase.
The Indian real estate market is experiencing several key trends:
- Increasing digitalization: Virtual property tours, online documentation, and digital payments
- Focus on affordable housing: Government initiatives and market demand driving affordable housing projects
- Rise of integrated townships: Self-contained developments with work, living, and leisure spaces
- Sustainable and green buildings: Growing demand for eco-friendly and energy-efficient homes
- Infrastructure development: Metro expansions, new highways, and smart city initiatives influencing property values
Case Study: In 2018, Ramesh invested in a property in Pune's Hinjewadi area at ₹5,500/sq.ft. Following the completion of metro connectivity in 2023, property values increased to ₹7,800/sq.ft., representing a 42% appreciation over five years, significantly outperforming many other investment options.
Rent vs. Buy Analysis
The decision to rent or buy depends on various factors including how long you plan to stay in the home, current market conditions, and your financial situation.
| Consideration | Renting | Buying |
|---|---|---|
| Initial Cost | 3-6 months rent as deposit | 20-30% down payment + stamp duty + registration |
| Monthly Cost | Rent + maintenance | EMI + property tax + maintenance + insurance |
| Equity Building | None | Builds equity with each payment |
| Tax Benefits | HRA exemption | Section 80C, 24(b), and 80EEA benefits |
| Flexibility | High (can relocate easily) | Low (significant transaction costs to sell) |
Example: Suresh compared renting vs. buying a 2BHK apartment in Bangalore:
- Renting: ₹25,000/month (increasing 5% annually)
- Buying: ₹90L apartment with ₹18L down payment and ₹72L loan at 8% for 20 years (EMI: ₹60,200/month)
- Break-even point: 8 years (considering tax benefits, equity building, and property appreciation)
- Decision: Since Suresh plans to stay for 10+ years, buying makes more financial sense
Lifestyle Considerations
Beyond financials, home buying decisions should reflect your lifestyle needs and future plans:
- Family size and growth: Consider future family expansion when choosing property size
- Commute and location: Balance property costs with commute time and transportation expenses
- Amenities and necessities: Proximity to schools, hospitals, markets, and recreational facilities
- Work flexibility: With remote work options, some buyers are prioritizing larger homes in more affordable areas
- Investment potential: Some locations offer better long-term appreciation prospects than others
Ramesh and Suresh's decision: After careful consideration, Ramesh chose a compact apartment in a central location with excellent connectivity, while Suresh opted for a larger property in a developing suburb with good schools and upcoming infrastructure projects. Both made choices aligned with their unique priorities, financial situations, and long-term goals.