1. What is Mortgage Affordability?

Mortgage affordability determines how much you can borrow based on your income, existing debts, and lender's multiplier. It helps you understand your home buying budget before house hunting.

2. How Does the Calculator Work?

The calculator uses the mortgage affordability formula:

Where:

• \( Income \) — Your annual or monthly income (USD)
• \( Multiplier \) — Lender's income multiplier (typically 4-5x)
• \( Debts \) — Your existing monthly debt payments (USD)

Explanation: The equation calculates your maximum potential mortgage by multiplying your income by a standard multiplier, then subtracts your existing debts to determine what you can actually afford.

3. Importance of Affordability Calculation

Details: Knowing your affordability prevents overborrowing, helps with budgeting, and gives you realistic expectations when house hunting. Lenders will use similar calculations when approving your mortgage.

4. Using the Calculator

Tips: Enter your income (annual or monthly - be consistent), use a multiplier between 4-5 (check with lenders), and include all recurring debt payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I use gross or net income?
A: Most lenders use gross (pre-tax) income, but some affordability calculators use net income for more accurate results.

Q2: What's a typical multiplier?
A: Standard multipliers range from 4-5 times your income, but some lenders may go higher for exceptional cases.

Q3: What debts should I include?
A: Include all recurring debts - credit cards, car loans, student loans, personal loans, and any other monthly obligations.

Q4: Does this include the down payment?
A: No, this calculates mortgage amount only. You'll need additional savings for down payment and closing costs.

Q5: How accurate is this calculator?
A: This provides a general estimate. Actual approval amounts may vary based on credit score, interest rates, and lender policies.