Home affordability calculator
What the standard 28/36 lending ratios allow you to buy, which of the two is actually limiting you, and what your other debts are costing in purchase price.
Price these ratios support
$363,288
Your other debts are the binding limit here, on a 2,400 monthly housing budget
- Loan amount
- $303,288
- Monthly housing budget
- $2,400.00
- Unlocked by clearing debts
- $55,269
| Front-end limit (28% of income) | $2,800.00 |
|---|---|
| Back-end limit (36% less other debts) | $2,400.00 |
| Property tax a month | $333.00 |
| Insurance a month | $150.00 |
| Left for principal and interest | $1,917.00 |
- Your other debts are the binding constraint. Every $100 a month of them costs about $4,606 of purchase price, so clearing them all would raise this by $55,269.
- The ratio caps total housing cost, not the mortgage payment. Tax, insurance and fees come out of the same budget before any of it reaches principal and interest.
- This is what standard ratios permit, not what a particular lender will approve or what is comfortable to live on.
Your other debts are the binding constraint here: $1,200 a month of them costs $55,269 of purchase price, or about $4,606 for every $100 a month.
How this is calculated
How this is calculated
Two tests, and the lower one wins
The front-end cap allows 28% of gross income for housing — $2,800 on $120,000. The back-end cap allows 36% for housing plus every other debt payment, so $1,200 of debts leaves $2,400. The smaller figure is the budget.
budget = min(income · 28%, income · 36% − other debts)The cap covers more than the mortgage
Property tax, insurance and any strata fee come out of that same budget before a dollar reaches principal and interest. Here $333 of tax and $150 of insurance leave $1,917 to service the loan itself.
Tax depends on the price it helps set
Property tax is a share of the purchase price, which depends on the loan, which depends on what is left after tax. The three are solved together rather than estimated, which is why the answer holds exactly at 1.1% or 2.5%.
price · (1 + k·t/12) = k · (budget − insurance − fees) + depositWorked example: $120,000 income, $1,200 of other debts, $60,000 deposit at 6.5%
| Household income | $120,000 |
|---|---|
| Other debts | $1,200 a month |
| Deposit | $60,000 |
| Rate and term | 6.5% over 30 years |
| Housing budget | $2,400 a month |
|---|---|
| Purchase price | $363,288 |
| Loan | $303,288 |
| Clearing the debts adds | $55,269 |
The same income with no other debts supports $418,557 — the debts cost more house than the deposit adds.
What this assumes
- Lenders apply the 28% and 36% caps you enter.
- Income is gross, before tax.
- The deposit is cash available at settlement.
- No mortgage insurance, closing costs or moving costs.
- Property tax is a flat share of the purchase price.
Where this commonly goes wrong
- The ratio caps total housing cost, not the mortgage payment. Sizing a loan against 28% of income while ignoring tax and insurance overstates the result by whatever those cost — $483 a month here.
- A single "you can afford" figure hides which test is binding. If the front-end cap is the limit, paying down a car loan buys you nothing; if the back-end cap is, every $100 is worth about $4,606 of price.
- These are conventions, not approvals. A lender will also test your rate at a buffer above the one on offer, which lowers every figure here.
- Affordable and comfortable are different questions. The ratios say nothing about childcare, medical costs or how secure the income is.
Questions
What is the 28/36 rule?
Two limits lenders apply together. Housing cost should stay under 28% of gross monthly income, and housing plus every other debt payment under 36%. Whichever produces the smaller housing budget is the one that binds, which is usually the second for anyone carrying a car or student loan.
Does paying off my car actually help?
Only if the back-end test is what limits you. In the example, clearing $1,200 of monthly debts raises the purchase price from $363,288 to $418,557 — about $4,606 for every $100 a month. If the front-end cap binds instead, clearing debt changes nothing.
Why is the answer lower than other calculators?
Most size the loan against the housing cap and stop, ignoring that property tax and insurance are paid out of the same budget. At 1.1% tax and $1,800 insurance that is $483 a month, which is roughly $76,000 of purchase price on these figures.
Does a bigger deposit raise what I can buy?
Dollar for dollar, yes — it adds directly to the price without touching the monthly budget. It does not raise the loan, though: the loan is set by what your income supports, so a deposit buys price rather than borrowing power.
Should I borrow the maximum?
The ratios are a lending ceiling, not a recommendation. They take no account of childcare, medical costs, income stability or what you want to spend on things that are not a house, and they are calculated on gross income rather than what actually lands in your account.
What if my lender uses different ratios?
Change them. Some lenders allow 31/43 on insured loans and some are stricter than 28/36. Both caps are inputs here for that reason, and moving either one shows immediately which of the two is doing the limiting.
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Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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