Home Affordability Calculator

Formula

To calculate the maximum loan:

\[ ML = YI \times 0.28 \times LT - IR \times YI \times 0.28 \]

Where:

$ML$ is the maximum loan
$YI$ is your yearly income
$LT$ is the loan term
$IR$ is the interest rate of the loan

What is Home Affordability?

Home affordability is defined as the total value of a home that a person can afford based on their income. This metric is useful for budgeting and estimating the total cost of a home purchase based on the buyer's financial situation.

Example Calculation 1

Let's assume the following values:

Yearly Income ($YI$) = $100,000
Loan Term ($LT$) = 30 years
Interest Rate ($IR$) = 5%

Using the formula:

Step 1: Calculate the maximum loan:

\[ ML = 100000 \times 0.28 \times 30 - 0.05 \times 100000 \times 0.28 = 840000 - 1400 = 838600 \]

The maximum loan is $838,600.

Example Calculation 2

Let's assume the following values:

Yearly Income ($YI$) = $80,000
Loan Term ($LT$) = 20 years
Interest Rate ($IR$) = 4%

Using the formula:

Step 1: Calculate the maximum loan:

\[ ML = 80000 \times 0.28 \times 20 - 0.04 \times 80000 \times 0.28 = 448000 - 896 = 447104 \]

The maximum loan is $447,104.