Looking to buy a home? It’s important to take out a mortgage that you can reasonably afford.
A mortgage is a home loan that is usually paid back in fixed amounts over a period of time – typically 15 or 30 years. Each payment includes a portion that goes toward the mortgage principle, and another portion that goes toward interest charged by the lender.
Most experts recommend that your monthly mortgage payment should not exceed 35% of your gross income. But that is the upper end. Other models are more conservative and suggest 25%, in order to keep your debt-to-income ratio lower. A middle-ground recommendation says you shouldn’t put more than 28% of your monthly gross income toward your mortgage payment.
And don’t forget to consider additional costs associated with owning a home, such as utilities, taxes, maintenance, which will add to your monthly costs.
This calculator can help you determine what your monthly payments will be, based on how much money you plan to borrow for your home purchase.