Home
Back
Affordability Formula:
| From: | To: |
The Home Affordability Calculator estimates the maximum home price you can afford based on your income and monthly interest rate. It uses the standard 28% rule to determine affordable housing costs.
The calculator uses the affordability formula:
Where:
Explanation: The formula calculates the maximum affordable home price by determining how much of your income can be allocated to housing costs based on the prevailing interest rate.
Details: Calculating home affordability is crucial for responsible financial planning, ensuring you don't overextend yourself with mortgage payments and maintain a healthy debt-to-income ratio.
Tips: Enter your income in your local currency, and the monthly interest rate as a decimal (e.g., 0.04 for 4%). All values must be positive numbers.
Q1: Why use the 28% rule?
A: The 28% rule is a standard financial guideline that suggests housing costs should not exceed 28% of your gross income to maintain financial stability.
Q2: What is considered a good monthly rate?
A: Monthly rates vary by market conditions, but generally, rates below 0.005 (0.5%) are considered favorable for borrowers.
Q3: Should I include other debts in this calculation?
A: This calculator focuses on housing affordability only. For a complete picture, consider your total debt-to-income ratio including other obligations.
Q4: Does this include property taxes and insurance?
A: This calculation provides a baseline for mortgage affordability. Additional costs like property taxes, insurance, and maintenance should be considered separately.
Q5: How often should I recalculate affordability?
A: Recalculate whenever your income changes significantly or when interest rates fluctuate to ensure your home search remains within your budget.