🏠 House Affordability Calculator
Work out the house price your income actually supports, using the 28/36 rules lenders apply, your deposit, and the debt payments you already have.
What you can borrow, what you can afford, and why they differ
A lender will tell you the maximum they will advance. That number answers the question "what is the largest loan we can approve without excessive risk to us". It does not answer "what can I pay every month for thirty years while still saving, running a car and absorbing a bad year". Those two numbers are rarely the same, and the gap is where most housing stress lives.
The 28/36 rules
The conventional underwriting guidelines, and what the calculator applies:
- Front-end ratio, 28%. Total housing cost, including mortgage payment, property tax and insurance, should stay under 28% of gross monthly income.
- Back-end ratio, 36%. All debt payments, housing plus car loans, student loans and minimum card payments, should stay under 36% of gross monthly income.
Whichever rule is tighter is the one that binds. Someone with no other debt is usually limited by the 28% rule; someone with a car loan and student loans is usually limited by the 36% one. Lenders frequently approve beyond 36%, in some programmes up to 43% or higher, which is where approval and affordability start to diverge.
How other debt eats into the house
| Other monthly debt | Housing budget | House price you can buy |
|---|---|---|
| $0 | $2,217 | $339,000 |
| $300 | $2,217 | $339,000 |
| $600 | $2,250 | $344,000 |
| $900 | $1,950 | $298,000 |
| $1,200 | $1,650 | $252,000 |
Below about $600 a month of other debt, the 28% rule binds and additional debt makes no difference. Above it, the 36% rule takes over and every extra dollar of debt payment removes roughly three dollars of monthly housing budget. Clearing a $400 car payment before applying can be worth $60,000 of purchase price.
The costs the headline payment hides
| Item | Typical range |
|---|---|
| Property tax | 0.3% to 2.2% of value |
| Home insurance | $1,200 to $3,000 |
| Mortgage insurance (deposit under 20%) | 0.5% to 1.5% of the loan |
| Maintenance | 1% of value, as a planning rule |
| HOA or service charge, where applicable | $200 to $600 a month |
The 1% maintenance rule is a long-run average, not a monthly bill. Most years are cheaper and then a roof costs $14,000. Treat it as a sinking fund rather than as an expense you can skip.
The deposit
Twenty per cent is the threshold where mortgage insurance usually disappears and the better rates begin. Below it you can still buy, and in many markets waiting to reach 20% means watching prices rise faster than you save, so it is a genuine trade-off rather than a rule. What is not a trade-off: do not empty your emergency fund into the deposit. Closing costs of 2% to 5% also have to come from somewhere.
The stress test
Before committing, check the payment at a rate two points higher than you are quoted. If a 6.5% loan becomes unaffordable at 8.5%, you are buying at the limit of what works today rather than what works through a cycle. Regulators in several countries require lenders to run exactly this test, which tells you something about how useful it is.
A worked example
A household on $95,000 gross with $450 of other monthly debt and $60,000 saved, at 6.5% over 30 years with 1.6% for tax and insurance. The 28% rule allows $2,217 a month and the 36% rule allows $2,400, so the 28% rule binds. That supports a purchase price of about $339,000, a loan of $279,000 and a deposit of 18%, which is just under the threshold, so mortgage insurance would apply on top of the $2,217.
Frequently Asked Questions (FAQs)
How much house can I afford on my salary?
A quick rule is three to four times gross household income, but it depends heavily on the interest rate, your deposit and your other debts. At 6.5% with a 20% deposit and no other debt, a $95,000 income supports roughly $340,000. The same income at 4% supports closer to $420,000.
What is the 28/36 rule?
Housing costs under 28% of gross monthly income, and all debt payments under 36%. They are underwriting guidelines rather than laws, and many lenders go beyond them, but they describe the level at which most households stay comfortable rather than merely solvent.
Should I borrow the maximum I am approved for?
Generally no. Approval is a measure of the lender's risk tolerance, not of your financial comfort. Buying at 85% to 90% of the maximum leaves room for maintenance, a rate rise at renewal, and a year of lower income.
Does my credit score affect how much house I can buy?
Indirectly but substantially. It affects the rate, and the rate affects the payment. The difference between a 6% and a 7.5% mortgage on the same payment is roughly 13% of purchase price, which on a $350,000 target is $45,000.
Is a bigger deposit always better?
Up to a point. Reaching 20% removes mortgage insurance and improves the rate, which is a large and immediate return. Beyond that, extra deposit just reduces a relatively low-rate debt, and the money may do more in an emergency fund or a retirement account.
Does this include closing costs?
No. Closing costs run 2% to 5% of the purchase price and are paid once at completion, separately from the deposit. On a $340,000 purchase that is $7,000 to $17,000, which needs to exist on top of the deposit.