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Mortgage Availability Formula:
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The Mortgage Availability calculation determines how much mortgage a person can afford based on their income, a multiplier factor, and existing debts. It provides an estimate of borrowing capacity for home purchase.
The calculator uses the mortgage availability formula:
Where:
Explanation: The formula calculates maximum borrowing capacity by multiplying income by a standard multiplier, then subtracts existing debts to determine available mortgage amount.
Details: Calculating mortgage availability helps potential homebuyers understand their borrowing capacity, plan their budget, and determine what price range they can afford when house hunting.
Tips: Enter your income, the lender's multiplier (typically 4-5), and your total existing debts. All values must be non-negative numbers.
Q1: What is a typical income multiplier used by lenders?
A: Most lenders use a multiplier between 4-5 times annual income, though this can vary based on market conditions and individual circumstances.
Q2: Should I use gross or net income for this calculation?
A: Lenders typically use gross annual income for mortgage affordability calculations.
Q3: What debts should be included in the calculation?
A: Include all recurring monthly debt obligations such as car loans, credit card payments, student loans, and other personal loans.
Q4: Does this calculation include the down payment?
A: No, this calculation determines borrowing capacity only. The down payment is separate and affects the total purchase price you can afford.
Q5: Are there other factors that affect mortgage approval?
A: Yes, lenders also consider credit score, employment history, property type, and loan-to-value ratio when approving mortgages.