Trying to calculate how much mortgage you can safely afford is a little bit of a double edged sword. There is the amount you want, the amount the bank will lend you, and of course, the actual amount you can safely afford. Enter the Millennial Homeowner Mortgage Affordability Calculator.
This Mortgage Affordability Calculator is unlike the other affordability calculators. This calculator is designed to give you the amount you can safely afford once you have factored in all of your other expenses.
How is this Mortgage Affordability Calculator Different?
It’s based on your take home income (the bank uses gross income, which is the amount you make before taxes and deductions), and factors in all of your other expenses like housing, debt and everything else.
If you want to dive deep into how much home you can safely afford, I strongly suggest you get our guide “How Much Home Can I Safely Afford?” In it we go into all the details and give you a worksheet to figure out your monthly mortgage payment.
Why does this form have so many more boxes?
The original Mortgage Affordability Calculator (aka what you see on most bank sites) goes by how much income you make BEFORE taxes, this takes none of your personal items into account. The only thing the bank is interested in when lending you money is that you can safely repay them. This is why they want to know your other debts when using their calculator. They have to keep a certain debt ratio otherwise there is a higher risk of default.
Remember if you are using the banks loan affordability calculator, then you are being told what the bank will lend you, not how much you can afford.
There is a world of difference between what you can actually afford and what the bank is willing to lend you. Don’t be fooled. Use the calculator above to know how much you can safely afford before you take out a mortgage.
What do I do after I have Figured out How Much Home I can Safely Afford?
Once you have used the calculator to figure out a safe amount that you can borrow. The next step would be to get pre-approved for a mortgage, if you are planning on buying a home soon. If you are just in the beginning stages then you can start to save up for your down payment.