Loan Affordability Calculator

Calculate how much you can afford to borrow based on your income and financial situation.

How Loan Affordability is Calculated

This calculator determines how much you can borrow based on:

Debt-to-Income Ratio: Your total monthly debt payments shouldn't exceed a certain percentage of your income (typically 40%).
Disposable Income: After fixed expenses, you need enough income left to cover loan payments.
Safety Buffer: The recommended amount includes a 10% buffer for unexpected expenses.

The calculator takes the more conservative of the DTI limit and disposable income constraints to ensure you can comfortably afford the loan.

With $5,000/month income, $1,500 expenses, $300 existing debt, at 7% interest for 20 years:

What is debt-to-income (DTI) ratio?: Debt-to-income ratio is the percentage of your monthly income that goes toward debt payments. Lenders use this to assess your ability to manage monthly payments. Most lenders prefer a DTI below 40%, though some may accept up to 50% for certain loan types.
Why is the recommended amount lower than the maximum?: The recommended amount includes a 10% safety buffer to account for unexpected expenses, income fluctuations, or interest rate changes. Borrowing at your absolute maximum leaves no room for financial emergencies and can lead to financial stress.
What factors affect how much I can borrow?: Key factors include your monthly income, existing debt payments, fixed expenses, the interest rate, and loan term. A higher income, lower expenses, and longer loan term increase how much you can borrow. Lower interest rates also increase affordability.