1. What is the House Affordability Calculator?

The House Affordability Calculator estimates the maximum house price you can afford based on your income and interest rate, using the standard 28% rule of housing affordability.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Income \) — Your annual income in currency
• \( Rate \) — Annual interest rate as a decimal (e.g., 0.05 for 5%)
• 0.28 — Standard percentage of income allocated to housing (28%)

Explanation: This formula calculates the maximum house price you can afford while keeping your housing costs at or below 28% of your income.

3. Importance of Affordability Calculation

Details: Calculating housing affordability is crucial for financial planning, ensuring you don't overextend yourself financially when purchasing a home.

4. Using the Calculator

Tips: Enter your annual income in currency and the annual interest rate as a decimal. All values must be valid (income > 0, rate between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: Why use 28% as the housing expense ratio?
A: The 28% rule is a standard financial guideline that suggests spending no more than 28% of your gross income on housing expenses.

Q2: What does the result represent?
A: The result shows the maximum house price you can afford while maintaining the 28% housing expense ratio.

Q3: Are there other factors to consider?
A: Yes, you should also consider down payment, property taxes, insurance, and other debts when determining affordability.

Q4: Is this calculation accurate for all situations?
A: This provides a general estimate. Individual circumstances may vary based on credit score, debt-to-income ratio, and local housing market conditions.

Q5: Should I use gross or net income?
A: This calculator uses gross income, following the standard 28% rule. Some experts recommend using net income for a more conservative estimate.