Use this handy step-by-step guide to calculate the maximum purchase price that you can comfortably afford. Once you have completed the guide, PRINT THIS PAGE for future reference.
Use these ratios to determine your monthly mortgage amount. If you have a 25 year mortgage due in 5 years, the rate could be 8.5%. If the mortgage required is $100,000, you would multiply by the ratio to find out what the monthly carrying cost would be. Example: $100,000 X .00795 = $795.00 monthly mortgage cost. STEP 1 STEP 2 NOTE: If annual payments for debts and servicing (personal loans, credit cards, car payments) exceed 10% of your annual salary, you may have problems obtaining the maximum amount of mortgage from your bank. Check with your bank if this situation applies to you.
MAXIMUM PURCHASE PRICE CALCULATION
The ratios are based on a 25-year mortgage due in five years.
4% = .00526
4.25% = .00540
4.50% = .00553
4.75% = .00567
5% = .00582
5.25% = .00596
5.50% = .00610
5.75% = .00625
6% = .00640
6.25% = .00655
6.50% = .00670
6.75% = .00685
7% = .00700
7.25% = .00716
7.50% = .00731
7.75% = .00747
8% = .00763
8.25% = .00779
8.50% = .00795
8.75% = .00812
9% = .00828
9.25% = .00844
9.50% = .00861
9.75% = .00878
Your annual income
Divide income by 40. This will equal maximum monthly mortgage budget including principal, interest and taxes.
Monthly mortgage budget (from above)
Approx. monthly taxes on the home you want to purchase
Balance available ( a minus b )
Divide (c) by desired interest rate factor (from table above. This will give you your maximum mortgage amount.)
MORTGAGE AMOUNT
Add down payment you have set aside
MAXIMUM PURCHASE PRICE
