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How much home you can afford, using the 28/36 debt-to-income rule.
The Mortgage Affordability Calculator applies the 28/36 debt-to-income rule to your gross income: it caps the housing payment at 28 percent of monthly gross income, or at 36 percent minus your existing monthly debts, whichever is lower, and then converts that payment back into the loan it supports at your rate and term using the standard annuity formula. Add your down payment and you get the home price the rule allows. It is for the stage before you talk to a lender, when you want a defensible ceiling rather than an estate agent's optimism. This is general information, not lending or financial advice — a lender's own underwriting will differ.
Open Mortgage Affordability Calculator on AltFTool — it loads instantly in your browser.
Enter your gross annual income to establish the foundation of your mortgage affordability calculation
Input your other monthly debts, such as car loans, credit cards, and student loans, to account for all your financial obligations
Adjust the interest rate, term, and down payment fields to see how different mortgage scenarios impact your affordability
Most quick estimates apply only the 28 percent housing ratio; this takes the lower of that and the 36 percent total-debt limit after your existing repayments.
The maximum payment is run back through the present-value annuity formula at your actual rate and term, so the loan figure reflects the cost of borrowing rather than a multiple of salary.
Maximum monthly payment, maximum loan and your down payment are listed separately, so you can see which of the three is the binding constraint.
It is a lending guideline that caps housing costs at 28 percent of gross monthly income and total debt payments — housing plus everything else — at 36 percent. On a $90,000 salary, gross monthly income is $7,500, so the housing cap is $2,100 and the total-debt cap is $2,700; with $500 of other monthly debt the binding limit is the $2,100 front-end figure.
Under the 28/36 rule with $500 of other monthly debt, a 6.5 percent rate and a 30-year term, the $2,100 maximum payment supports a loan of roughly $332,000. Add a $40,000 down payment and the affordable price comes to about $372,000 — change the rate or term and that figure moves substantially.
No. The calculator turns the entire allowed payment into loan principal and interest, whereas lenders count taxes, homeowners insurance, HOA dues and any mortgage insurance inside the 28 percent limit. Subtract your estimate of those costs from the maximum monthly payment before treating the loan figure as realistic.
Because every rupee or dollar of other monthly repayment comes straight out of the 36 percent back-end allowance. At $7,500 gross monthly income the total-debt cap is $2,700, so $700 of car and card payments leaves $2,000 for housing — below the 28 percent limit, making existing debt the binding constraint.
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