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Affordability Formula:
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The Mortgage Affordability Calculator estimates how much mortgage you can afford based on your income, a multiplier, and your existing debts. It provides a quick assessment of your borrowing capacity.
The calculator uses the affordability formula:
Where:
Explanation: This formula calculates the maximum mortgage amount you might qualify for by multiplying your income by a standard lending ratio, then subtracting any existing debts.
Details: Understanding your mortgage affordability is crucial for financial planning, setting realistic property budgets, and ensuring you don't overextend yourself financially.
Tips: Enter your annual income, the lending multiplier (typically 4-5), and your total existing debts. All values must be positive numbers.
Q1: What is a typical multiplier used by lenders?
A: Most lenders use a multiplier between 4-5 times your annual income, though this can vary based on your financial circumstances.
Q2: What debts should I include in the calculation?
A: Include all regular debt payments such as credit cards, loans, car finance, and any other ongoing financial commitments.
Q3: Does this calculation include interest rates?
A: No, this is a basic affordability calculation. Actual mortgage offers will depend on current interest rates and detailed affordability assessments.
Q4: Should I use gross or net income?
A: Lenders typically use gross (pre-tax) income for affordability calculations, but you should consider your net income for personal budgeting.
Q5: Are there other factors that affect mortgage affordability?
A: Yes, lenders also consider credit history, employment stability, deposit size, and other financial commitments beyond simple debt payments.