Salary EMI Percentage: How much of your salary should go towards home loan?

14 January, 2026 | 16:33 IST

Buying a home is a major financial milestone. You can either pay the full amount using your savings or opt for a financing option through a home loan. Most people usually prefer taking out a home loan, as investing all their money in a single asset may not be the best financial decision. That's why home loans are often the preferred choice as they allow repaying the amount in small instalments over a longer tenure.

However, a home loan comes with a long-term financial commitment and can consume a significant chunk of your monthly salary in the form of EMIs. The question often arises: What percentage of your salary should you consider when applying for a home loan?

What is home loan?

A home loan is a type of secured loan given to borrowers for either purchasing a new home or renovating an existing one. The interest rate on a home loan is typically lower than that of other loans, as it is a secured loan where the borrower has to pledge the property as collateral.

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Home loan EMI

The EMI that you will be paying on your home loan will depend on various factors such as the loan amount, the repayment tenure, and the interest rate. The EMI on home loans is generally considered higher because of the bigger loan amount. But it is manageable as they have longer repayment periods, usually above 20 years.

What percentage of your income should be your EMI for home loans?

Taking a home loan is not an easy decision and can lead to long-term debt and financial stress if not planned wisely. As a rule of thumb, the EMI on your house loan shouldn't be above 35–40% of your monthly salary. The primary reason for this is that you don't just have to pay EMIs; you also have other essential expenses such as your children's school fees, utility bills, groceries and more.

And if you put 60-70% of your income towards EMI, it can create a significant burden on your finances, making it harder for you to manage other necessary expenses. In the long run, this financial pressure might force you to default on your home loan EMI or take other loans, such as personal loans.

Also, it is crucial to set aside some savings every month. These savings can act as a financial cushion in case of emergencies. Since home loans generally have longer tenures, there is always a possibility of interest rate hikes in the future, which could make your EMI higher. Therefore, maintaining a contingency fund or corpus to absorb such fluctuations is a wise financial strategy.

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Why is the 40% rule important?

The 40% rule is important to ensure that you are not overburdened by your monthly EMIs and still have enough income left to cover basic needs, savings and investments. Exceeding the 40% mark might put you in financial strain and may also impact your credit score.

However, it is not mandatory to limit your EMI to only 40%. Your monthly EMI can go up to 50-60% but only if you have no other loans or financial dependents. You should also ensure that you have a high and stable income, excluding freelancing projects.

Higher EMIs are also manageable if you expect a significant salary hike soon or have minimal living expenses and other financial commitments.

For example: Your monthly salary is Rs 80,000. According to the ideal home loan EMI percentage of salary, which is 40%, your EMI will be Rs 32,000. So, if you take a home loan of Rs 35 lakh at 8% interest for 20 years, then your EMI would be around Rs 29,000. This falls within the safe range, and you still have around Rs 50,000 left for meeting other monthly expenses and savings.

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Conclusion

Opting for a home loan is not a bad decision, as long as you maintain financial health by keeping the right home loan EMI percentage of your salary. The golden rule is to keep your home loan EMI within 30-40% of your monthly income, depending on your lifestyle, obligations and future plans.