Mortgage Calculator
If you'd like to find out whether you can afford a mortgage on your home, you might use the How much house can I afford Mortgage Calculator. This Mortgage Calculator helps you to calculate and find out which mortgage you can afford with your monthly income.
Note: you will also find a Mortgage Calculator on many real estate websites, bank websites and mortgage broker websites. Serious property investors will usually buy a special hand held Mortgage Calculator, just like any other pocket calculator but with the special features of a Mortgage Calculator.
How to use the Mortgage Calculator
A Mortgage Calculator works such that you have to enter the amount of mortgage you wish to take out, the loan repayment period, mortgage rate, annual property tax in dollars and the monthly payment on other debts such as auto loans, personal loans and credit cards etc. It's that simple. The Mortgage Calculator will do the rest.
The How much house can I afford Mortgage Calculator or How much mortgage can I afford Mortgage Calculator will compute the result and give you the monthly loan payment including principal and interest, your total monthly debt payment (including payments on mortgage and other obligations) and the monthly income you need to pay off the desired amount of mortgage.
An example on how to find out if you can afford a mortgage using the Mortgage Calculator
Let's say that you need a loan amount of $100,000 for a period of 10 years.
Mortgage rate = 6.5%
Annual property tax = $1500
Using the Mortgage Calculator, you get:
Monthly mortgage payment (principal + interest) = $ 1135.48
Total monthly debt payment = 5260.48
The monthly income that you require for mortgage payoff = 15029.94
This Mortgage Calculator has worked out that if your monthly income is around $15029 or even more, only then you'll be able to afford a mortgage amount worth 100,000 for a repayment period of 10 years.
You can then enter different information, such as a 30 year term instead of 10 years. The Mortgage Calculator will then give you the new results.
Key factors that affect how much you can afford
The Mortgage Calculator can take into account key factors such as the Front Ratio and Back Ratio. Here's some more detail about the 2 ratios:
Front Ratio: This ratio gives you an idea of what percentage of your gross monthly income goes towards the total monthly house payment including mortgage and any other housing cost. It is determined by the total monthly house payment divided by your gross monthly income. The standard ratio preferred by lenders is 28%.
Back Ratio: This ratio tells you what portion of your gross monthly income should be spent towards the total monthly debt payment. It is calculated by dividing the total payment on all your debts (including house payment and other debt obligations) by the gross monthly income. The standard ratio preferred is 36%.
Thus, the 2 ratios affect the calculations carried out by the Mortgage Calculator and hence influence your mortgage affordability.
As mentioned, you can find a Mortgage Calculator on a real estate website. And you can find a Mortgage Calculator on a bank website or brokers website. Some banks and mortgage brokers give way a little sliding card type Mortgage Calculator to their customers. If you like to buy multiple properties, I have found that the most efficient and simple form of Mortgage Calculator is a real estate pocket size Mortgage Calculator. You can take it with you wherever you go, just like any pocket calculator, and you are ready to do your calculations on the spot with your personal Mortgage Calculator, to see if the deal is a good one or not.