Home affordability calculator

The two ratios

Affordability is not a feeling, it is two fractions. Lenders compute both and lend against whichever gives the smaller number.

• Front-end ratio — housing cost divided by gross monthly income. Housing cost means principal, interest, property tax, insurance and any service charge. The traditional limit is 28%.
• Back-end ratio — all monthly debt divided by gross monthly income. That includes the new housing cost plus car finance, student loans, credit card minimums and maintenance payments. The traditional limit is 36%.

The calculator shows which one is binding for you. If the back-end is binding, paying down a car loan raises your budget directly. If the front-end is binding, clearing debts changes nothing and only a bigger deposit or a cheaper area helps.

Why the answer is a loan, not a price

The ratios cap a monthly payment. Turning that payment into a purchase price takes two steps: work out how much loan the payment supports at the given rate and term, then add your deposit. The loan step inverts the standard mortgage formula, solving for principal instead of payment.

This is why rate movements swing affordability so violently. At 3%, a payment of $2,000 a month over 30 years supports roughly $474,000 of loan. At 6.5%, the same $2,000 supports about $316,000 — a third less house for the same money, with no change in your income.

The costs that are easy to forget

The "tax, insurance and fees" field matters more than people expect, because it comes out of the same capped budget as the mortgage. Property tax alone can run from a few hundred a year to well over 2% of value annually depending on where you buy. Add buildings insurance, and service charges or HOA dues if the property has them.

If you put down less than 20%, most lenders add mortgage insurance, which belongs in that field too. Separately, budget for closing costs of roughly 2-5% of the price — those come out of your savings at completion, so money set aside for them is not available as deposit.

What the ratios do not know

They work from gross income, which means two households with identical salaries and very different tax positions get the same answer. They ignore childcare, which can rival a mortgage payment. They ignore how secure your income is, and they assume the rate you enter lasts the whole term — untrue for any variable or fixed-then-reverting product.

Treat the output as the ceiling a lender might allow, not a recommendation. Borrowing materially below it is how people keep the flexibility to absorb a rate rise or a broken boiler.

Common questions