Home Affordability Calculator
Work out how much house you can afford from your income, debts and deposit using the 28/36 rule, with what lenders count and what they leave out.
How the 28/36 rule works
Lenders commonly cap the housing payment at 28% of gross monthly income (the front-end ratio), and housing plus all other debt payments at 36% (the back-end ratio). Whichever cap is lower sets your budget. These are guidelines, not laws — some loans stretch further, but budgets stretched past them leave little room for everything else in life.
One point on the rate costs a tenth of the house
Affordability is usually discussed as a question about prices. For anyone borrowing it is mostly a question about the rate. Holding the payment at $2,000 a month over 30 years, the loan it supports:
| Rate | You can borrow | Change per point |
|---|---|---|
| 3% | $474,379 | — |
| 4% | $418,922 | -11.7% |
| 5% | $372,563 | -11.1% |
| 6% | $333,583 | -10.5% |
| 7% | $300,615 | -9.9% |
| 8% | $272,567 | -9.3% |
Going from 6% to 7% removes $32,968 of house from the same budget — 9.9%. Each point costs roughly a tenth, and the effect is slightly stronger at low rates than high ones.
So a rate move outweighs a price move
The useful comparison is what price cut would compensate:
| At 7%, with a price cut of | You can buy | Against the 6% baseline |
|---|---|---|
| 0% | $300,615 | still short |
| 5% | $316,437 | still short |
| 10% | $334,017 | past it |
Waiting for a 5% price fall and paying a point more leaves you worse off than buying today. The exact break-even is 9.9%, and that is not a coincidence — it is precisely the borrowing power the point took away. The discount you need always equals the fractional loss it caused, because both are the same ratio read in opposite directions.
Worth reading in both directions. A market where prices fall 8% and rates rise a point has become less affordable, not more, even though every headline is about the price.
And only one of the two ratios binds at a time
The conventional limits are 28% of gross monthly income on housing and 36% on all debt combined. On $120,000 of income:
| Other debts | 28% rule allows | 36% rule allows | Binding |
|---|---|---|---|
| $0/mo | $2,800 | $3,600 | the 28% housing rule |
| $200/mo | $2,800 | $3,400 | the 28% housing rule |
| $400/mo | $2,800 | $3,200 | the 28% housing rule |
| $600/mo | $2,800 | $3,000 | the 28% housing rule |
| $800/mo | $2,800 | $2,800 | the 36% total rule |
| $1000/mo | $2,800 | $2,600 | the 36% total rule |
The total rule only takes over once other debts pass $800 a month. Below that the housing rule binds and your car loan is irrelevant to what you can borrow; above it, every extra dollar of other debt costs you a dollar of housing budget.
The switchover is exactly 8% of gross monthly income whatever the income is, because it is simply the difference between the two percentages. That makes it checkable in your head: if your non-housing debt payments come to less than 8% of your monthly gross, only the 28% figure matters and paying down the car will not raise your budget by a penny.
How to use
- Enter your gross annual income and monthly debt payments.
- Add your deposit and the expected rate.
- Read the price range the rule suggests.
- Sanity-check it against your actual monthly budget.
Frequently asked questions
What is the 28/36 rule?
A long-standing lending guideline: housing costs should stay under 28 per cent of gross monthly income, and total debt payments including housing under 36 per cent. Many lenders now allow higher, particularly on government-backed loans, but the rule remains a useful conservative benchmark.
Is gross or net income used?
Gross, which is a major reason the rule can feel generous. A borrower approved at 28 per cent of gross may be spending closer to 40 per cent of what actually reaches their account once tax and deductions are taken out. Checking the figure against net income is worth doing.
What does the calculation leave out?
Everything that is not a debt payment: childcare, commuting, food, saving, insurance, and the maintenance a house needs. A common rule of thumb budgets 1 to 2 per cent of the property value annually for upkeep, and it is entirely absent from any affordability formula.
What deposit do I actually need?
Twenty per cent avoids mortgage insurance in most markets, but plenty of loans allow far less — some as little as 3 per cent, and some government-backed programmes none. A smaller deposit means a larger loan, a higher payment and usually insurance on top, so the monthly cost rises on three fronts at once.
Should I borrow the maximum I am approved for?
Approval indicates what a lender is willing to risk, not what leaves you comfortable. Borrowing to the limit removes the slack that absorbs a job loss, a rate change on a variable loan, or a boiler failure. Many people deliberately buy below their maximum for exactly that reason.
How reliable is this estimate?
As a starting range, reasonable; as a decision, not enough. Actual approval depends on credit history, employment stability, the property itself, and each lender's own criteria. This is a planning tool and not financial advice — a lender's written assessment is the only figure that binds anyone.
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