How much can I borrow?
One of the most common questions asked by buyers when starting the home buying process is "How much of a mortgage can I afford?" Obviously, the answer to this question will directly impact the price range of homes that you can consider when searching the market. The answer to this question is not set in stone, though, as it only takes into account your current circumstances. Interest rates or house prices could fall, or you could get a promotion and a pay rise, which could vastly increase the amount you are able to borrow. However, there are guidelines that you can follow in order to figure out how much of a mortgage you can afford and qualify for, which is where the Maximum Mortgage Calculator comes in. There are two main factors that are taken into consideration to determine how much of a mortgage payment you can handle. These are your monthly income (usually salary) and your monthly obligations (credit card debts, car payments, etc).
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Monthly housing expenses:
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Qualifying Mortgage Amount for a Variety of Interest Rates
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Total monthly income from all sources. All income should be entered before taxes.
Monthly housing expenses
Your monthly housing expenses from the housing expenses worksheet. The items entered as housing expenses make up the taxes and insurance portion of your monthly PITI payment.
Your monthly liabilities from the liabilities worksheet. Your monthly liabilities are used to calculate your maximum PITI.
Monthly housing payment (PITI)
This is your total principal, interest, taxes and insurance (PITI) payment per month. This includes your principal, interest, real estate taxes, hazard insurance, association dues or fees and principal mortgage insurance (PMI). Maximum monthly payment (PITI) is calculated by taking the lower of these two calculations:
- Monthly Income X 28% = monthly PITI
- Monthly Income X 36% - Other loan payments = monthly PITI
Maximum principal and interest (PI)
This is your maximum monthly principal and interest payment. It is calculated by subtracting your monthly taxes and insurance from your monthly PITI payment. This calculator uses your maximum PI payment to determine the mortgage amount that you could qualify for.
Start interest rates at
The current interest rate you could receive on your mortgage. This is used as the starting point for displaying a range of interest rates and the resulting mortgage amount.
Term in years
The number of years over which you will repay this loan. The most common mortgage terms are 15 years and 30 years.
The mortgage you qualify for varies according to your present circumstances. The two main factors that are typically considered in determining how much mortgage you qualify for are your monthly income and your monthly expenses. The Maximum Mortgage Calculator uses your current financial situation to calculate the maximum monthly mortgage payment that you can afford.
Our maximum mortgage calculator helps you calculate the maximum monthly mortgage payment and total mortgage amount you can afford. The calculator also helps you determine the effects of different interest rates and levels of personal income on how much mortgage you can afford. This calculator is for you if you are reviewing your financial stability as you get ready to purchase a property.
To use our maximum mortgage calculator, all you have to do is:
- Input the interest rate you expect to pay on your mortgage.
- Select your loan term from the drop-down menu. The loan term represents the number of years it’ll take you to repay your mortgage.
- Input your monthly income and that of your co-borrower. That could be your spouse, next-of-kin, etc.
- Under the Monthly Liabilities section, put in any usual repayments that you have to make on a monthly basis.
- Under the Monthly Housing Expenses section, select the appropriate answers from the list provided.
- Click on the View Report button. A graph containing the maximum amount you can borrow depending on your interest rate will be displayed.
This is rather very unlikely. The general rule of thumb with mortgages is that you can borrow a mortgage that costs up to two and a half (2.5) times your annual gross income. Ultimately, your maximum mortgage eligibility is calculated by weighing your income against your debts, purchase price of the house, your down payment, the mortgage’s interest rate as well as property taxes and insurance.
The answer to this question is totally dependent on your present situation. To determine what kind of mortgage is right for you, you would need to realistically consider your financial situation. Some important questions you would need to answer include whether you are able to make a down payment, the length of time you would spend in the house, the state of things with your annual salary for the period of the mortgage as well as your credit history.
Ideally, it is better to get started with your mortgage calculations before you even find a home. As long as you know how much you can make as a down payment, your monthly salary and expenses, and your loan term, you can go ahead to begin punching those numbers.
Your credit score plays a crucial role in the type of mortgage that you will be eligible for. This is because that score is what is used to predict how likely you are to repay your new mortgage loan. Your chances of getting a good mortgage value hinges on how good a credit score you have, so it is important to request a copy of your credit report and credit score about a couple of months before you start making your maximum mortgage calculations.
The values used in calculating your maximum mortgage amount include your annual income (without taxes), the loan term you are looking to get, the interest rates you are likely to get, and your monthly recurring expenses.
Some of the most considered factors involved in determining the mortgage you qualify for are your debt-to-income ratio, your loan-to-value ratio, and your credit score. Your credit score has more of an impact on the pricing of your loan than how much you qualify for.
If after using the maximum mortgage calculator, you find that you have a mortgage value lower than what you would have liked, do not fret. There are a few ways you can improve your mortgage amount. They include making a larger down payment, making smarter decisions as to the neighborhood where you are looking to buy from, and trying to reduce your debts, even just by a little. The final factor in particular is quite important as it helps reduce your debt-to-income ratio and in some cases, improve your credit score.
Why Use The Maximum Mortgage Calculator?
Once you input your monthly obligations and income, the Maximum Mortgage Calculator will calculate the maximum monthly mortgage payment (and total mortgage amount) that you can afford, based on your current financial situation. This calculator will also help to determine how different interest rates and levels of personal income can have an effect on how much of a mortgage you can afford.
How To Use The Maximum Mortgage Calculator
Not sure where to start? Let us help you:
- Input the interest rate you expect to pay on your mortgage – if you aren’t sure of this yet leave the default value as this is representative of the current market average
- Select a loan term from the drop-down menu – this is the number of years over which you will repay your mortgage
- Add your monthly income and that of your co-borrower (spouse, family member, etc)
- Under Monthly Liabilities, add any regular repayments you make on a monthly basis
- The final section is Monthly Housing Expenses; select the relevant answers from the drop-down lists provided - if you don’t know the answers yet, leave the default values there
- Click View Report to see a graph displaying the maximum amount you can borrow depending on the interest rate, based on your financial circumstances.
Who is this Calculator for?
The Maximum Mortgage Calculator is most useful if you:
- Want to know exactly how much you can safely borrow from your mortgage lender
- Are assessing your financial stability ahead of purchasing a property
- Would like to compare the impact of different interest rates on the amount you can feasibly borrow.
My result came out higher than the amount I wish to borrow – what now?
Now that you have ascertained that you are in a strong enough financial situation to sustain the purchase of your desired property, you need to set about getting in touch with some mortgage providers.
Fortunately, we have made this process very easy for you. Simply click the Get FREE Quote button and you will be taken through a very brief set of questions. We will then ask our carefully selected lenders to contact you directly with the very best quotations they can provide. By reaching out to lenders this way, you get the best deal possible and are saved the effort of contacting them yourself – it couldn’t be simpler!
What are my options if the result is less than I need?
In this case, you may find that adjusting the loan term enables you to meet your requirements. Although it will mean repaying more in total over the course of your loan, the lower monthly repayments could help you to afford more than your initial result suggests.
Alternatively, you can experiment with different interest rates – to get the best options delivered directly to you, click the Get the FREE Quote button to get in touch with lenders who will be able to assist you.
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