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Mortgage Affordability

Last modified by
on
Aug 2, 2023, 2:09:34 PM
Created by
on
Apr 26, 2016, 7:16:11 PM
MA=f($MP,i%,30)
(MP)Monthly payment
(i)Interest Rate
(n)Loan Duration

The Mortgage Affordability calculator estimates the maximum principal one can borrow on a fixed rate loan and support with a monthly payment based the interest rate and loan duration.  

INSTRUCTIONS: Choose units and enter the following:

  • (MP) Monthly Payment
  • (n) Loan Duration
  • (i) Fixed Interest Rate (default is the current 30 year fixed rate)

Affordable Loan Amount (AM): The calculator returns the amount that can be borrowed in US dollars.  However, this can be automatically converted to compatible units via the pull-down menu..

The Math / Science

This calculator loops through the monthly payment equation unit it reaches a principal amount that drives a monthly payment in excess of the preferred monthly payment (MP).  NOTE: this does not take into account that the first few years of a mortgage are largely interest payments, which is usually a tax deduction.  If your monthly payment is based on your personal history of paying rent, which is NOT tax deductible, you will find that it is not a 1 to 1 comparison.  One one hand, you will get tax money back, on the other, you will have expenses maintaining the property that the landlord used to cover. 

This formula is commonly used for home mortgages and other simple debt.  It is typically used in a way were the periods (t) are in years, and the number of payments per period (n) is 12 for the number of months.  The word AMORTIZATION comes from the Middle English amortisen which means "to kill".  In essence, this is the amount needed on a regular basis "to kill" a debt.  The formula for amortized payment is:

MP= P(r12)1-(1+(r12))-12N

where:


Personal Finance Calculators


This equation, Mortgage Affordability, is used in 2 pages
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