Use this calculator to estimate the maximum mortgage loan you can afford and the corresponding monthly payments. Understanding your borrowing power is a crucial first step in your home-buying journey.
Understanding Your Mortgage Affordability
Determining how much mortgage you can afford is a complex process that involves several factors. Lenders typically assess your ability to repay based on your income, existing debts, and the proposed mortgage terms.
Key Factors Explained:
Annual Household Income: This is your primary source of repayment ability. Lenders look at your stable, verifiable income to ensure you can cover the monthly payments.
Down Payment Amount: A larger down payment reduces the loan amount needed, which in turn lowers your monthly payments and the overall interest paid. It also demonstrates your financial commitment.
Monthly Debt Payments: Lenders use your Debt-to-Income (DTI) ratio to gauge your financial health. This ratio compares your total monthly debt obligations (including the estimated new mortgage payment) to your gross monthly income. A lower DTI generally indicates a lower risk for the lender. A common guideline is that total debt payments (including mortgage) should not exceed 43% of your gross monthly income.
Estimated Mortgage Interest Rate: The interest rate significantly impacts your monthly payment. A higher rate means higher interest charges over the life of the loan and a larger monthly payment for the same loan amount.
Mortgage Loan Term: This is the number of years you have to repay the loan. Common terms are 15 or 30 years. Longer terms result in lower monthly payments but more interest paid overall. Shorter terms have higher monthly payments but less total interest.
How the Calculator Works:
This calculator provides an estimate based on common lending practices. It calculates an estimated maximum loan amount by considering a common DTI ratio (often around 36% for housing expenses, including principal, interest, property taxes, and homeowners insurance – PITI) and your available income after covering existing debts. It then uses the loan term and interest rate to estimate the monthly principal and interest (P&I) payment associated with that loan amount.
Important Note: This is an estimate only. Actual loan approval and maximum loan amount will be determined by the lender after a full credit and financial review. Property taxes, homeowners insurance, and potential Private Mortgage Insurance (PMI) are not included in the P&I calculation but will affect your total monthly housing payment.
function calculateMortgage() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var currentDebts = parseFloat(document.getElementById("currentDebts").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(downPayment) || isNaN(currentDebts) || isNaN(interestRate) || isNaN(loanTerm)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Assume a maximum housing debt-to-income ratio (e.g., 36% for PITI)
// This is a common guideline, lenders vary.
var maxHousingRatio = 0.36;
var grossMonthlyIncome = annualIncome / 12;
var maxMonthlyDebtPayment = grossMonthlyIncome * maxHousingRatio;
var availableForMortgage = maxMonthlyDebtPayment – currentDebts;
if (availableForMortgage 0) {
estimatedMaxLoanAmount = availableForMortgage * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// Handle case where interest rate is 0 (unlikely but for completeness)
estimatedMaxLoanAmount = availableForMortgage * numberOfPayments;
}
// Ensure loan amount isn't negative and account for down payment
var potentialHomePrice = estimatedMaxLoanAmount + downPayment;
// Calculate the actual monthly P&I payment for the estimated loan amount
var actualMonthlyPayment = 0;
if (monthlyInterestRate > 0 && numberOfPayments > 0) {
actualMonthlyPayment = estimatedMaxLoanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else if (numberOfPayments > 0) {
actualMonthlyPayment = estimatedMaxLoanAmount / numberOfPayments;
}
resultDiv.innerHTML = `