Loan Affordability Calculator

The question this tool answers: how much can I actually borrow?

A loan calculator tells you the monthly payment for a loan you've already chosen. This tool works the other way round — it starts from your income and debts and tells you the largest loan you can responsibly afford. That's the number you need before house-hunting, because it sets the price ceiling you should shop within. The calculation uses the same debt-to-income rules that conventional mortgage lenders apply, so the figure it produces is a realistic estimate of what an underwriter would approve, not an optimistic guess. All the maths runs in your browser; your income and debt figures are never transmitted.

The 28/36 rule, explained

Lenders cap how much of your income can go toward debt, measured two ways. Both are debt-to-income (DTI) ratios:

• Front-end DTI is your housing payment divided by gross monthly income. The conventional ceiling is 28% — no more than 28 cents of every income dollar should go to the mortgage.
• Back-end DTI is all your monthly debt — the new housing payment plus car loans, student loans, credit-card minimums — divided by income. The ceiling here is 36%.

The tool computes the maximum payment each rule allows and takes the lower of the two, because you have to satisfy both. The front-end limit is simply income × 0.28. The back-end limit is income × 0.36 − existing debts, since your other debts eat into the 36% budget before the mortgage does. Whichever is smaller becomes your affordable monthly payment.

From affordable payment to loan amount

Once it knows your maximum monthly payment, the tool reverses the standard mortgage formula to find the principal that payment can support. The relationship is P = M × (1 − (1+r)⁻ⁿ) / r, where M is the monthly payment, r is the monthly interest rate (annual rate ÷ 12), and n is the number of months (term in years × 12). A higher rate or a shorter term means each dollar of payment buys less principal, so your affordable loan shrinks even though your income hasn't changed.

A worked example

Take the default scenario: $7,000 gross monthly income, $400 in existing monthly debts, a 6.5% rate over 30 years. The front-end limit is 7000 × 0.28 = $1,960. The back-end limit is 7000 × 0.36 − 400 = $2,120. The lower of the two is the front-end $1,960, so that becomes your maximum payment. Reversing the mortgage formula at 6.5% over 360 months turns $1,960/month into a maximum loan of roughly $310,000. The tool shows that principal, the resulting monthly payment, and the total cost over the full term — which, because of interest, is far more than the amount borrowed.

What the rest of the tool shows you

• DTI bars. Two progress bars visualise your front-end and back-end ratios against their thresholds, turning red if a ratio exceeds 28% or 36% respectively — an instant read on whether a scenario is within safe limits.
• Check a specific amount. Have a particular house price in mind? Enter that loan amount and the tool computes its monthly payment, total cost, and both DTI ratios, flagging in red if either breaks the rule. This is how you test whether a listing you've found is actually within reach.
• First-year amortization. A 12-month schedule breaks each payment into principal and interest. Early on, most of every payment is interest — seeing that split is sobering and explains why early extra principal payments save so much.
• Rent vs. buy. Enter your current rent and the tool compares total renting cost against total buying cost (mortgage plus a 1%/year maintenance estimate) over the loan term, with a plain-English verdict.

Practical tips

• Use gross, not take-home, income. Lenders work from gross monthly income — your pay before tax and deductions. Entering net income will understate what you can borrow.
• Include every recurring debt. The back-end ratio only protects you if it knows about your car payment, minimum credit-card payments, and student loans. Leaving them out inflates the affordable figure.
• Lower your rate input to see the leverage. Drop the rate from 6.5% to 5.5% and watch the affordable loan jump. Interest rate is the single biggest lever on buying power after income.
• Treat the result as a ceiling, not a target. Borrowing the maximum leaves no buffer for emergencies. Many financially comfortable buyers deliberately stay well under their front-end limit.

What the tool deliberately leaves out

This is an affordability estimate, and a few real-world costs sit outside it by design. It does not add property taxes, homeowner's insurance, or HOA fees, which lenders fold into the housing payment when computing front-end DTI — so a real underwriter's housing limit is effectively tighter than the bare mortgage figure here. It assumes a fixed rate and excludes the down payment, closing costs, and private mortgage insurance. The rent-vs-buy comparison is intentionally simplified: it ignores home appreciation, the tax deductibility of mortgage interest, and the opportunity cost of your down payment. Use the result to set a sensible search range, then confirm the exact figure with a lender who will factor in taxes, insurance, and your full credit profile.