Enter your yearly salary, length of the Mortgage term, and interest rate into the home affordability calculator. The calculator will display your maximum mortgage you should take out, and the monthly payments of that mortgage.

## Home Affordability Formula

The following formula is used to calculate the maximum loan someone should take out for a loan.

ML = YI* .28 * LT – IR*YI*.28

• Where ML is the maximum loan
• Where YI is your yearly income
• LT is the lone term
• IR is the interest rate of the loan

## Home Affordability Definition

Home affordability is defined as the total value of a home that a person can afford based on their income.

## How to calculate home affordability.

How to calculate how much money to spend on a home?

1. First, use the 28/36 rule.

This says that at max 28% of your income before taxes should go to a mortgage.

2. Next, determine your yearly income.

Make sure this income is the total yearly income before taxes

3. Determine the loan term you wish to have

The longer the loan the more interest will be paid.