This calculator helps you determine the maximum home loan amount you can afford based on your desired monthly payment, interest rate, and loan term.
Maximum Loan Amount You Can Afford
$0.00
Understanding the Home Loan Reverse Calculator
The Home Loan Reverse Calculator is a valuable tool for prospective homebuyers. Unlike a standard mortgage calculator that shows you your monthly payment for a given loan amount, this calculator works in reverse. It helps you determine the maximum loan principal you can borrow based on what you can comfortably afford to pay each month, combined with the prevailing interest rates and the desired loan duration.
How the Calculation Works
The calculator uses the standard loan payment formula, but rearranges it to solve for the principal (loan amount). The formula for the monthly payment (M) of a loan is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment
P = The principal loan amount (what we want to find)
i = Your monthly interest rate (Annual Interest Rate / 12 / 100)
n = The total number of payments over the loan's lifetime (Loan Term in Years * 12)
To find the maximum loan amount (P), we rearrange the formula:
P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
The calculator takes your desired monthly payment, converts the annual interest rate to a monthly rate, and calculates the total number of payments. It then plugs these values into the rearranged formula to give you the maximum loan principal you can qualify for.
Key Inputs Explained:
Desired Monthly Payment: This is the maximum amount you are comfortable paying towards your mortgage principal and interest each month. It's crucial to consider not just the loan payment but also property taxes, homeowner's insurance, and potential HOA fees (often included in your PITI – Principal, Interest, Taxes, Insurance).
Annual Interest Rate (%): This is the yearly interest rate offered by the lender. The calculator converts this to a monthly rate for the calculation. Higher interest rates mean you can afford a smaller loan principal for the same monthly payment.
Loan Term (Years): This is the duration of the loan, typically 15, 20, or 30 years. A longer loan term will result in lower monthly payments for the same principal amount, but you'll pay more interest over the life of the loan.
Why Use a Reverse Calculator?
Budgeting: Helps you set realistic home price expectations based on your financial capacity.
Negotiation: Knowing your borrowing limit empowers you when making offers on properties.
Financial Planning: Allows you to see how changes in interest rates or desired payment amounts affect the loan principal you can obtain.
Remember, this calculator provides an estimate. Lenders will consider other factors like your credit score, debt-to-income ratio, employment history, and down payment when determining your actual loan approval amount.
function calculateMaxLoanAmount() {
var monthlyPaymentInput = document.getElementById("monthlyPayment");
var annualInterestRateInput = document.getElementById("annualInterestRate");
var loanTermYearsInput = document.getElementById("loanTermYears");
var resultDisplay = document.getElementById("maxLoanAmount");
var resultContainer = document.getElementById("result-container");
var monthlyPayment = parseFloat(monthlyPaymentInput.value);
var annualInterestRate = parseFloat(annualInterestRateInput.value);
var loanTermYears = parseInt(loanTermYearsInput.value);
if (isNaN(monthlyPayment) || monthlyPayment <= 0) {
alert("Please enter a valid desired monthly payment.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter a valid loan term in years.");
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var maxLoanAmount = 0;
// Handle the case where the interest rate is 0%
if (monthlyInterestRate === 0) {
maxLoanAmount = monthlyPayment * numberOfPayments;
} else {
// Rearranged mortgage formula to solve for Principal (P)
// P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator === 0) { // Avoid division by zero, though unlikely with valid inputs
alert("Calculation error: Denominator is zero. Please check inputs.");
return;
}
maxLoanAmount = monthlyPayment * (numerator / denominator);
}
if (isNaN(maxLoanAmount) || maxLoanAmount < 0) {
alert("Could not calculate loan amount. Please check your inputs.");
return;
}
resultDisplay.textContent = "$" + maxLoanAmount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
resultContainer.style.display = "block";
}