How does the Home Affordability Calculator work?
First the maximum affordable payment is set: Payment = income · ratio ÷ 100. From this comes the possible loan: Loan = (payment · 12) ÷ ((rate + repayment) ÷ 100). Add your down payment for the maximum price: Price = loan + down payment.
Background & details
The number that matters most is the maximum monthly payment – not the price. The price is just what falls out of it. So ask yourself first: can I make this payment every single month, even when the car breaks or a child arrives? Only then is the figure healthy.
How to read the result
The calculator splits your affordable payment into interest + repayment. At a 3.5 % rate and 2 % repayment, 5.5 % of your loan is serviced each year. A higher initial repayment clears the debt faster – but shrinks the price you can afford at the same payment. That is not a contradiction; it is a deliberate trade-off between "more house" and "debt-free sooner".
Typical values
- Down payment: Ideally cover the closing costs (which vary by country, often 2–6 %) plus 10–20 % of the price. Lenders reward more equity with noticeably better rates and a lower loan-to-value.
- Initial repayment: Below 2 % the term gets dangerously long (often 35+ years). 2–3 % is considered solid.
- Housing cost ratio: 30–35 % is the safe zone. Above 40 % things get tight fast.
Common mistakes
The biggest one: staring at the maximum price and maxing it out. That number is a ceiling, not a target. The second: forgetting closing costs – they are not in the result and usually have to come out of your down payment, not the loan. The third: assuming today's low rate for the whole term. After a fixed period of 5, 10 or 15 years comes a refinance that may cost a lot more.
Practical tips
Budget a maintenance buffer – as an owner you pay for repairs yourself (a rough rule is 1 unit of currency per square metre per month). Re-run the payment at a higher rate to check whether you could survive a costlier refinance. And keep an emergency fund of 3–6 months of expenses instead of pouring every last coin into the down payment.
This tool is perfect for a first reality check before you talk to a bank or agent. For the actual mortgage you need a concrete offer with your personal rate, because that depends on your credit profile, the property and the loan-to-value.