Loan Affordability Calculator

How it works

A lender will lend you the amount that your monthly payment can repay, with interest, over the term. That amount is the present value of the payments: each future payment is discounted back to today at the loan's monthly interest rate, and the discounted payments are added up.

If you already know what you can pay each month, enter it. If not, choose to work it out from your income: the calculator takes your debt-to-income limit as a share of your gross monthly income and subtracts the debt payments you already make. What is left is the most a new loan payment can be under that limit.

A longer term or a lower rate lets the same payment carry a bigger loan, but a longer term also means paying interest for longer. Compare the total interest line, not only the loan amount.

Formula

r = annual rate ÷ 12 ÷ 100        n = term in months
payment (income route) = gross monthly income × DTI limit − other debt payments
maximum loan = payment × (1 − (1 + r)^−n) ÷ r
maximum loan = payment × n                        when r = 0
total interest = payment × n − maximum loan

Example

A $500 monthly payment at 7% for 60 months repays a loan of $25,251.00. The 60 payments total $30,000, so $4,749.00 of that is interest.

Working from income instead: $6,000 a month gross at a 36% debt-to-income limit allows $2,160 of debt payments. With $500 already going to other debts, a new payment can be up to $1,660, which at 7% over 60 months supports a loan of $83,833.31.

Assumptions and limitations

• The interest rate is fixed for the whole term, payments are monthly at the end of each month, and the loan fully amortizes.
• Fees, insurance, taxes and other charges are not included; if a lender adds them to the payment, enter only the principal-and-interest part you can afford.
• The 36% debt-to-income limit is a typical traditional guideline (the 28/36 rule), not a lender's actual standard. Lenders set their own limits by loan type and credit profile, so change it to match the offer you are considering.
• Being able to borrow an amount does not mean you can comfortably repay it. The calculation ignores taxes, living costs and savings.
• This is an estimate for planning. It is informational and educational and not financial, tax or legal advice.

Frequently asked questions