Loan Affordability Calculator

Use this calculator to estimate how much loan payment may fit within a target debt-to-income ratio. It helps you connect income, existing debt, interest rate, and term to a rough maximum affordable loan amount.

What this calculator does

The loan affordability calculator estimates an affordable payment and converts it into a loan amount.

It uses:

• gross monthly income
• monthly debt payments
• target DTI percentage
• loan rate and term

The result shows the maximum affordable payment and estimated loan amount. It is for planning only and does not represent lender approval.

How to use the loan affordability calculator

Enter your gross monthly income, existing monthly debt payments, target DTI percentage, interest rate, and term. A common target might be based on a lender limit or your own comfort level.

The calculator subtracts current debt payments from the target debt allowance, then estimates the loan amount that payment could support.

Loan Affordability Formula

Max affordable payment = gross monthly income x target DTI - monthly debt payments

Estimated loan amount = affordable payment converted using the amortisation formula

Example calculation

If:

• Gross monthly income = 8,000
• Target DTI = 35%
• Current debts = 1,200
• Available payment = 1,600

Then:

Max affordable payment = 8,000 x 35% - 1,200 = 1,600

That payment is then converted into an estimated loan amount using the selected rate and term.

What is loan affordability?

Loan affordability is the amount of borrowing that appears manageable based on income, existing debts, rate, and repayment term. It is not the same as approval because lenders may also review credit, assets, employment, and risk.

The Debt-to-Income Ratio Calculator can help with the DTI part of the analysis.

Interpreting your result

If the affordable payment is negative or low, existing debt may already use too much of the target debt capacity. Lower debt, a longer term, or a smaller loan may be needed.

When to use this calculator

Use this calculator when you want to:

• estimate borrowing capacity
• check payment comfort
• test DTI assumptions
• compare loan terms

Common mistakes

Common mistakes include:

• using net income instead of gross
• ignoring existing debts
• choosing an unrealistic DTI
• treating affordability as approval

FAQs

Is this a lender approval calculator?

No. It is an affordability estimate only.

What is DTI?

DTI means debt-to-income ratio, or monthly debt payments divided by gross monthly income.

Does a longer term increase affordability?

It can increase the estimated loan amount, but it may also increase total interest.

Is this financial advice?

No. Use it for planning only.