How EMI Affordability Is Calculated in India

Summary

The EMI affordability calculator determines how large a home loan you can service based on your monthly income and existing obligations. Indian lenders use the Fixed Obligation to Income Ratio (FOIR) to cap total EMIs (including the new home loan) at typically 50-60% of net monthly income. The calculator shows your maximum eligible loan amount and the corresponding property you can afford.

How it works

FOIR (Fixed Obligation to Income Ratio)

Lenders assess your repayment capacity using FOIR:

FOIR = (All existing EMIs + Proposed home loan EMI) / Net monthly income

Most banks cap FOIR at 50-60% depending on income level:

• Income up to Rs 50,000/month: FOIR cap ~40-50%
• Income Rs 50,000-1,00,000: FOIR cap ~50-55%
• Income above Rs 1,00,000: FOIR cap ~55-65%

Maximum EMI calculation

Maximum new EMI = (Net monthly income x FOIR cap) - Existing EMIs

From the maximum EMI, the maximum loan amount is derived using the standard amortization formula, given the loan tenure and interest rate.

LTV (Loan to Value) limits

RBI mandates maximum LTV ratios:

• Property up to Rs 30 lakh: up to 90% LTV
• Property Rs 30-75 lakh: up to 80% LTV
• Property above Rs 75 lakh: up to 75% LTV

The lower of FOIR-based eligibility and LTV-based eligibility determines your actual loan amount.

Worked example

Net monthly income: Rs 1,00,000, Existing car EMI: Rs 15,000, Rate: 8.5%, 20 years

1. FOIR cap (55%): Rs 1,00,000 x 55% = Rs 55,000
2. Maximum home loan EMI: Rs 55,000 - Rs 15,000 = Rs 40,000
3. Maximum loan at 8.5%, 20 years: approximately Rs 46 lakh
4. At 80% LTV: maximum property price = Rs 46 lakh / 0.80 = Rs 57.5 lakh
5. Required down payment: Rs 11.5 lakh

Inputs explained

• Net monthly income — take-home salary (or combined with co-applicant)
• Existing EMIs — car loan, personal loan, credit card EMIs
• Interest rate — expected home loan rate
• Tenure — preferred loan duration (maximum 30 years)
• Co-applicant income — if applicable (increases eligibility)

Outputs explained

• Maximum EMI — the highest EMI you can comfortably service
• Maximum loan amount — based on FOIR and tenure
• Maximum property price — based on LTV limits
• Required down payment — difference between property price and loan
• FOIR utilisation — current and proposed ratio

Assumptions & limitations

• FOIR limits vary by bank. Some banks use gross income, others use net income.
• Variable rate loans may become unaffordable if rates rise significantly.
• Does not account for future income growth or planned expenses (children’s education, etc.).
• Co-applicant income can be clubbed to increase eligibility, but both become jointly liable.
• The calculator uses standard eligibility rules. Banks may apply internal credit scoring that further limits or enhances your eligibility.