5. HOUSE AFFORDIBILITY RATIO (HAR)
- It measures your ability to raise money during extraordinary circumstances, such as a medical emergency or loss of job.
- HAR = Price of house / Your monthly income ; Ideal HAR is less than 0.6
- If the ratio exceeds 60%, you are buying a house you can’t afford.
- However, if you are reasonably sure of a rise in income in the coming years, you can go ahead.
6. HOUSING PAYMENT RATIO (HPR)
- It measures your capacity to service a home loan.
- It is also used by lenders to determine your loan eligibility.
- HPR = Housing costs / Gross income ; Ideal HPR is less than 0.3
- Keep to the desired ratio and you will be able to stomach any sudden hikes in home loan interest rates.