{"id":582,"date":"2021-06-11T16:27:36","date_gmt":"2021-06-11T16:27:36","guid":{"rendered":"https:\/\/www.loanfasttrack.com\/blog\/?p=582"},"modified":"2022-08-02T09:43:18","modified_gmt":"2022-08-02T09:43:18","slug":"fixed-obligation-to-income-ratio","status":"publish","type":"post","link":"https:\/\/www.loanfasttrack.com\/blog\/blog\/mortgage-loan\/fixed-obligation-to-income-ratio\/","title":{"rendered":"Fixed Obligation To Income Ratio (FOIR) (All You Need To Know About FOIR)"},"content":{"rendered":"\n
\"Fixed<\/figure>\n\n\n\n

All\nlenders Banks\/NBFCs\/HFCs have stringent criteria to determine the eligibility\nand the creditworthiness of the loan applicants. The Repayment of a loan is one\nsuch important measure that determines whether a loan applicant is eligible or\nnot eligible for a loan. Before approving a loan to the applicant the lender\nthoroughly checks his CIBIL history<\/strong><\/a>, income details validated by the\ndocuments, employment details, financial stability, assets, liabilities &\nother obligations to ascertain the funding risks and the timely repayment of\nhis loan EMIs. Any loan defaults in the repayments may add to the NPAs of\nlenders and hence the lenders have rigorous multifaceted loan checks before it\nis finally disbursed.<\/p>\n\n\n\n

The following are the two common & popular parameters for determining the loan eligibility of the applicant in secured loans such as home loans<\/strong><\/a>, mortgage loans<\/strong><\/a>, commercial loans<\/strong><\/a> & industrial loans<\/strong><\/a>, home loan top-ups<\/strong><\/a>, etc. <\/p>\n\n\n\n

  1. Loan-To-Value\n(LTV)<\/a><\/strong> <\/li>
  2. FOIR<\/li><\/ol>\n\n\n\n

    The\nlower figure of the two i.e., LTV and FOIR will be the applicant\u2019s final loan\neligibility. <\/p>\n\n\n\n

    FOIR\nMeaning<\/strong><\/h2>\n\n\n\n

    FOIR full form in banking is Fixed Obligation to Income Ratio. Also\nreferred to as the debt-to-income ratio in the mortgage industry, it is always expressed\nin percentage. The loan eligibility using the parameter FOIR, is a percentage\nof the per month net income of the applicant. FOIR is a true reflection of your\ndisposable income and hence is also an indicator of your repayment capacity. <\/p>\n\n\n\n

    The\nFOIR is derived by considering the applicant\u2019s per month income and his fixed\nmonthly outgo excluding the statutory deductions of provident fund, investment\ndeductions such as SIPs, FDs, RDs & professional tax. The formula is the FOIR formula for\ncalculating the FOIR in\nbanking.<\/p>\n\n\n\n

    FOIR = (Sum of all monthly\nobligations <\/strong>\/<\/strong> Net income per\nmonth) <\/strong>* <\/strong>100<\/strong><\/p>\n\n\n\n

    Monthly\nObligations include fixed per month EMIs towards the existing loans (such as personal loan<\/strong><\/a>, car loan<\/strong><\/a>, gold loan, consumer loans, loan against property<\/strong><\/a>, etc.) including the EMI of the proposed loan<\/strong><\/a>, card bills, per month rent outgo,\nand other fixed expenses.<\/p>\n\n\n\n

    Let\u2019s understand with an example<\/strong><\/h3>\n\n\n\n

    Say,\n32 years old Mr. Vallabh has to apply for a housing loan in Mumbai. He is\ndrawing a net salary of Rs.80,000\/- pm and has the following obligations<\/p>\n\n\n\n

    Personal\nLoan (PL) EMI – Rs15,000\/- pm<\/p>\n\n\n\n

    Mortgage Loan EMI<\/strong><\/a> – Rs.35,000\/- pm<\/p>\n\n\n\n

    Car Loan\nEMI<\/strong><\/a> – Rs.12,000\/- pm<\/p>\n\n\n\n

    Now\nwhen he applies for a home loan his loan is rejected. Previously he has been\napproved for a loan thrice and has been timely making the repayments of the\nloan. Then why is Mr. Vallabh\u2019s home loan rejected? Let us understand the\nreasons for his home loan rejection. <\/p>\n\n\n\n

    All\nactive financial obligations of Mr. Vallabh are Rs.62,000\/- pm. i.e., 15000 +\n35000 + 12000. Now let\u2019s calculate his FOIR % with the help of the FOIR ratio formula.<\/p>\n\n\n\n

    Vallabh\u2019s\nhome loan FOIR calculation\n(%) = (62000\/80000) * 100 = 775%, which is too high. Since his FOIR is more\nthan the average FOIR requirement of 50%-60% his home loan application was\nrejected.<\/p>\n\n\n\n

    Additional Read: <\/strong>How to manage your multiple loan repayments.<\/strong><\/a><\/strong><\/p>\n\n\n\n

    Lender\u2019s FOIR Percentage Requirement<\/strong><\/h2>\n\n\n\n

    The FOIR ratio for\ncalculating the loan eligibility of the applicant<\/strong><\/a> differs from lender to\nlender and also varies from case to case. However, the standard FOIR percentage\nfor most of the lenders- Banks\/NBFCs\/HFCs ranges from 40% – 60% of the net per\nmonth income. At times the lender\u2019s FOIR percentage which is case-specific can be as high as\n265%-100% of the applicant\u2019s net monthly income. ICICI Bank which is one of the\ntop home loan mortgage lenders in India<\/strong><\/a> considers maximum FOIR for\ncalculating the home loan eligibility<\/strong><\/a> of its applicants. The maximum FOIR in home loan<\/strong><\/a> with ICICI Bank<\/strong><\/a> is 65%-70% for salaried applicants\nwhile for self-employed & professionals the FOIR for home loan can be as high as 100% of their\nnet incomes.Click to know how to apply for an online home loan with\nICICI Bank<\/strong><\/a>, home loan top-up with ICICI Bank<\/strong><\/a> & loan against property with ICICI Bank<\/strong><\/a>.<\/strong><\/p>\n\n\n\n

    Additionally,\nthe FOIR ratio also varies based on the type of loan applied for. The FOIR for\nunsecured loans i.e.  FOIR for personal loans& FOIR for business loans will have strict FOIR\ncriteria as compared to the secured loans because the secured loans are backed\nby the pledge of the asset i.e., the property. The government-sponsored loan\nschemes on the other hand will have a lenient FOIR criterion, such as the FOIR calculation for home loans\nin the government\u2019s PMAY affordable housing loan scheme. Given below are the FOIR percentage in India\nfor the type of loan products.<\/p>\n\n\n\n