Home Loans for Salaried Employees: Eligibility Criteria & Tax Benefits

Buying a home is a big dream for many, especially for salaried employees. But before applying for a home loan, it’s important to understand the eligibility criteria and the tax benefits that can reduce your financial burden.

In this blog, we’ll break down the essential factors that determine your loan eligibility and explore the tax benefits you can claim as a salaried employee.

Eligibility Criteria for Home Loans

Lenders have specific eligibility requirements that borrowers must meet before getting a home loan. Below are the main factors that affect your approval chances.

1. Age Requirement

• Most banks and financial institutions require applicants to be between 21 and 60/65 years old at the time of loan maturity.
• Different lenders may have slightly varying age criteria, so it’s best to check with your preferred lender.

2. Stable Income

• A steady monthly income is crucial for home loan approval.
• Lenders require proof of income through salary slips, bank statements, and income tax returns (ITR) for the past few years.
• Higher income levels increase your loan eligibility and improve your chances of getting a bigger loan amount.

3. Work Experience

• Employment stability is a key factor. Lenders prefer applicants with at least 2–3 years of continuous work experience.
• A stable job assures lenders that you can repay the loan on time.

4. Credit Score

• Your credit score (CIBIL score) is one of the most important eligibility factors.
• A credit score of 750 or above is considered good and increases your chances of loan approval.
• Lenders check your credit history to ensure you have a good repayment track record.

5. Loan Amount & EMI Affordability

• The amount of loan you get depends on your income and existing financial commitments.
• Lenders ensure that your total EMI (equated monthly installments) doesn’t exceed 40–50% of your monthly income.

6. Property Value & Down Payment

• Banks usually finance 80–90% of the property value, and you must pay the rest as a down payment.
• The property’s location, type, and condition also impact loan approval.

Tax Benefits on Home Loans for Salaried Employees

Apart from eligibility, tax benefits on home loans can help you save a significant amount of money. Here are the major tax deductions available under the Income Tax Act, 1961.

1. Tax Deduction on Home Loan Interest (Section 24b)

• You can claim up to ₹2 lakhs per year as a deduction on the interest paid for a self-occupied property.
• If your property is rented out, there is no limit on the deduction you can claim on the interest paid.

2. Tax Deduction on Principal Repayment (Section 80C)

• The principal amount repaid on the home loan is eligible for a tax deduction of up to ₹1.5 lakhs per year.
• This limit includes other eligible investments like PPF, EPF, ELSS, and life insurance premiums.

3. Tax Benefits for Joint Home Loans

• If you take a joint home loan (e.g., with your spouse or parents), both borrowers can claim separate tax benefits.
• Each borrower can claim up to ₹2 lakhs on interest (Section 24b) and ₹1.5 lakhs on principal repayment (Section 80C) based on their share of ownership.
• This can double your tax savings and reduce the overall cost of the loan.

How to Improve Your Home Loan Eligibility?

Here are a few tips to increase your chances of getting home loan approval:

• Maintain a high credit score (750+)
• Avoid multiple loan applications in a short period
• Choose a longer repayment tenure to reduce EMI burden
• Pay off existing debts before applying
• Opt for a joint home loan to increase eligibility

Read More About

• How to Reduce Home Loan Interest: Strategies for Saving Money

Conclusion

Understanding home loan eligibility and available tax benefits can make your home-buying journey smoother and more affordable. By meeting the lender’s eligibility criteria and taking advantage of tax deductions, you can reduce your financial burden and fulfill your dream of homeownership.

Before applying, use home loan eligibility calculators and consult financial experts to make an informed decision.

FAQs

1. What is the minimum salary required for a home loan?

The minimum salary required varies by lender but generally starts at ₹25,000-₹30,000 per month.

2. What credit score is needed for a home loan?

A credit score of 750 or above increases your chances of approval and better loan terms.

3. Can I get 100% home loan financing?

No, most lenders finance 80–90% of the property value. You must pay the rest as a down payment.

4. Can I claim tax benefits if I buy a second home?

Yes, but the tax treatment varies. The second home is considered deemed to be let out, and interest deduction rules apply accordingly.

5. What happens if I miss an EMI payment?

Missing an EMI can affect your credit score and lead to late payment penalties from the lender.

By following these guidelines, you can secure a home loan with ease and enjoy the tax benefits that come with it!