What is the 3/20/30/40 rule for home buying?
Buying a home is one of the largest financial decisions most people make, and stretching too far beyond your means can create debt pressure for decades. The 3/20/30/40 rule is a simple, widely used home affordability guideline that helps you identify a sustainable budget before you begin your property search.
The rule sets four targets based on your income:
| Rule |
Target |
What it means |
| 3 |
Home budget |
No more than 3 times your annual income |
| 20 |
Loan tenure |
Repay your home loan within 20 years |
| 30 |
Monthly EMI |
Keep your EMI under 30% of monthly income |
| 40 |
Down payment |
Pay at least 40% of the home value upfront |
Together, these four limits keep your home purchase affordable, protect your cash flow, and give your other financial goals room to breathe.
How does the home affordability calculator work?
The calculator applies each ratio of the 3/20/30/40 rule to your annual income with one pass of simple arithmetic.
Budget = Annual income × 3 | Max EMI = (Annual income ÷ 12) × 30% | Down payment = Home budget × 40% | Home loan = Home budget − Down payment
Worked example: Enter an annual income of ₹20,00,000. The calculator returns a maximum home budget of ₹60,00,000 (3 × income), an ideal repayment timeline of 20 years, a maximum monthly EMI of ₹50,000 (30% of ₹1,66,667 monthly income), and a recommended down payment of ₹24,00,000 (40% of budget), leaving a home loan of approximately ₹36,00,000.
Note: this output is a planning guideline based on the 3/20/30/40 rule. It does not account for interest on the home loan, stamp duty, registration charges, or maintenance costs. Treat it as a starting point and use the EMI calculator to estimate your exact monthly repayment.
How do I use the Chola Securities home affordability calculator?
Using the calculator takes one step.
- Enter your annual income — your total gross income for the year before deductions.
The calculator instantly applies all four ratios and shows your home budget, ideal tenure, maximum EMI, and recommended down payment in a single result.
Why follow the 3/20/30/40 rule?
- A budget capped at 3 times your income keeps the purchase within a range your income can comfortably service.
- A 20-year cap on the loan ensures you are not servicing home debt into retirement.
- Keeping your EMI under 30% of income leaves room for living expenses, emergency savings, and other investments.
- A 40% down payment reduces your outstanding loan, lowers your EMI, and cuts the total interest you pay over the tenure.