House Affordability Calculator

About the House Affordability Calculator

The house affordability calculator tells you how much home you can realistically afford based on your income, existing debts, available deposit, and the current interest rate environment — using the same 28/36 rule that most lenders apply when assessing your application. Understanding the difference between what you can borrow on paper and what you should borrow in practice is one of the most important financial distinctions a first home buyer can make. Banks will often lend you significantly more than is comfortable — up to five or six times your annual income in some markets — but financial planners and mortgage brokers consistently advise that the smarter ceiling is three to four times income for long-term financial wellbeing. The 28/36 rule, developed by US lending institutions and now applied as a guideline by lenders across the UK, Australia, Canada, and New Zealand, says two things: first, your monthly housing costs (mortgage principal, interest, insurance, and property taxes) should not exceed 28% of your gross monthly income; and second, your total monthly debt obligations — housing plus car loans, student loans, credit cards, and any other commitments — should not exceed 36% of gross monthly income. These are guideline maximums, not comfort zones. Many financial advisers recommend targeting 25% front-end and 33% back-end to preserve meaningful financial flexibility for savings, emergencies, and retirement contributions. The stress test component of our calculator is particularly important for Australian and UK buyers. The Australian Prudential Regulation Authority (APRA) requires that banks assess your ability to repay at a rate at least 3 percentage points above the loan's actual rate — so if the variable rate is 6.5%, your application is stress-tested at 9.5%. If you cannot afford the repayments at the stress-test rate, the bank will not lend you the full amount you applied for, even if you can comfortably afford repayments at the actual rate. This is why our calculator separates the maximum price (based on actual rate) from the recommended price (based on stress-tested rate) — the recommended figure is the more reliable planning number. The calculator also shows when your deposit falls below 20% of the purchase price, triggering Lenders Mortgage Insurance (LMI) in Australia or Private Mortgage Insurance (PMI) in the US. LMI protects the lender — not you — in the event of default, and the premium is typically added to your loan balance and accrues interest across the full loan term. On a $600,000 purchase with a 10% deposit, LMI can cost $8,000–$15,000. Crossing the 20% threshold eliminates this cost entirely, making it one of the most mathematically significant milestones in the home-buying journey. The income multiple comparison table at the bottom of the calculator lets you instantly see how affordability changes across the 3× to 5× income range, showing the monthly payment and front-end ratio at each level so you can calibrate your target price against your personal comfort threshold rather than the bank's maximum.

How It Works

The calculator applies the 28/36 rule with a stress-test adjustment. Step 1 — Maximum housing payment: Monthly income × 28% = maximum housing payment under the front-end rule. Step 2 — Maximum total debt: Monthly income × 36% − existing monthly debts = maximum available for housing under the back-end rule. Step 3 — Take the lower of steps 1 and 2. Step 4 — Convert maximum monthly payment to loan amount: Loan = Payment × [(1+r)^n − 1] / [r × (1+r)^n] where r = monthly rate, n = months. Step 5 — Add deposit for maximum home price. Step 6 — Repeat at stress-test rate (actual rate + buffer) for recommended price. Example: $100,000 income, $500 monthly debts, $80,000 deposit, 6.5% rate, 30-year term, 3% stress buffer. Monthly income = $8,333. Max housing (28%) = $2,333. Back-end available = $8,333 × 36% − $500 = $2,500. Use $2,333. Max loan at 6.5% = $369,000. Max price = $449,000. Stress-test at 9.5%: max loan = $279,000. Recommended price = $359,000.

Tips & Best Practices

• ✓The 28/36 rule is a maximum, not a target. Experienced financial advisers commonly suggest 25/33 as a more comfortable ceiling that preserves savings capacity for retirement, emergencies, and lifestyle expenses.
• ✓Australia's APRA stress test requires all banks to test affordability at your actual rate plus at least 3%. Our calculator defaults to 3% — increase this to 4% for a more conservative planning figure if rates are already historically low.
• ✓LMI is negotiable in the sense that some lenders capitalise it into the loan (adding to loan balance and accruing interest) while others allow upfront payment. If you have the cash, paying LMI upfront saves thousands in interest over the loan term.
• ✓The First Home Guarantee in Australia allows eligible first home buyers to purchase with as little as 5% deposit without paying LMI — the government guarantees the remaining 15% to the lender. This is income-tested and property-price-capped, but can save $15,000+ in LMI costs.
• ✓Pre-approval from a lender is far more reliable than our calculator's estimate for your specific situation, since lenders also consider credit score, employment stability, spending habits from bank statements, and other factors the calculator cannot access.
• ✓Variable versus fixed rate: the affordability calculation uses one rate, but your actual rate risk depends on whether you choose a fixed or variable product. If you choose variable, the stress-test rate is particularly important — ensure you can afford repayments if rates rise 3–4% from today.
• ✓Council rates, strata levies, and building insurance add approximately $300–$600/month to ownership costs for a typical home — these are not included in the mortgage payment but should be included in your personal affordability assessment.
• ✓Relationship changes: if you are purchasing jointly, ensure you have considered what happens if only one income is available for a period — parental leave, job loss, or illness. Can one income service the mortgage? If not, how long can savings bridge the gap?

Who Uses This Calculator

First home buyers determine their realistic price ceiling before beginning their property search — avoiding the heartbreak and wasted effort of falling in love with properties outside their genuine budget. Upgraders considering a larger home after years of equity growth model their new borrowing capacity based on their increased income and accumulated equity. Couples combining incomes calculate how much their joint buying power differs from either individual income. Property investors assess the income required to comfortably service a given property price before making an offer. Recent graduates entering the workforce at a starting salary plan how many years of income growth are needed before their target suburb becomes genuinely affordable. People considering relocation between cities compare the affordability ratio of their target city — a $100,000 salary affords a very different home in regional Queensland versus inner-city Melbourne.