Home Loan Calculator

What this calculator does

Buying a home comes down to two questions. What will I pay every month, and can I actually afford it? Most calculators answer only the first one. This one answers both.

You give it the loan amount, the term, the interest rate, and your monthly income. It hands back your fixed monthly payment, the total interest over the life of the loan, and a quick affordability check that compares the payment against your income. That last part is the piece worth paying attention to, because a payment you can technically get approved for and a payment you can comfortably live with are not always the same number.

How to use it

1. Home loan amount. The sum you plan to borrow, after your down payment. This is the principal.
2. Loan term. How long you will take to repay, in years.
3. Interest rate. The annual rate your lender quotes, as a percent.
4. Monthly income. Your gross monthly income, meaning before tax and deductions. The affordability check needs this.

Press Calculate for the monthly payment, the total interest, and the affordability verdict. Press Reset to start again.

How the monthly payment is worked out

The monthly figure is a standard amortized loan payment, the same math a bank uses. Each payment is part interest on what you still owe, and part repayment of the principal. The formula is:

Payment = P × r × (1 + r)ⁿ ÷ ( (1 + r)ⁿ − 1 )

Here P is the loan amount, r is the monthly interest rate, which is the annual rate divided by 12 and by 100, and n is the number of months, which is your term in years times 12. The total interest is simply the payment times the number of months, minus the amount you borrowed. If you want the derivation, it is the present value of an annuity, and the reference at the end walks through it.

The 28 percent rule, and what your result means

Lenders do not just check whether the math works. They check whether it works for you. The oldest rule of thumb for this is the 28 percent rule, sometimes written as part of the 28/36 rule.

The idea is simple. Your housing payment should sit at or under 28 percent of your gross monthly income. This is called the front-end ratio. Once your payment crosses that line, more of your income is tied up in the roof over your head than most lenders, and most budgets, are comfortable with. This calculator takes your payment, divides it by your income, and tells you which side of 28 percent you land on.

Two honest notes on what that check is, and is not. First, the full front-end ratio counts your whole housing cost, which includes property taxes and home insurance, not only the loan payment. This tool compares the loan payment alone, so treat its result as the floor. Your real housing ratio will be a little higher. Second, there is a companion number, the back-end ratio, which says all your debts together, the home loan plus car loans, cards, and everything else, should stay under 36 percent. This calculator does not know your other debts, so it cannot check that one for you. Keep it in mind.

A worked example you can check

Say you borrow Rs 3,000,000 over 20 years at 9 percent, and your gross monthly income is Rs 60,000. Let us run it.

• Months: 20 × 12 = 240
• Monthly rate: 9 ÷ 12 ÷ 100 = 0.0075
• Monthly payment: Rs 26,991.78
• Total paid over 240 months: Rs 6,478,026.88
• Total interest: Rs 3,478,026.88

Now the affordability check. The payment of Rs 26,991.78 against an income of Rs 60,000 is a ratio of 45 percent. That is well past the 28 percent line, so the calculator flags it: on this income, this loan would stretch you. And remember, that 45 percent is before taxes and insurance are added on. The message is not that the loan is impossible, it is that the numbers are asking you to either borrow less, earn more, or stretch the term, and the next sections cover those.

What affordability leaves out

A mortgage payment is the headline cost of a home, but it is not the whole cost. The 28 percent check is a useful gate, yet real life adds more on top:

• Property taxes, which scale with the value of the home.
• Home insurance, and in some places mortgage insurance on smaller down payments.
• Maintenance and repairs, which owners carry and renters do not.
• Your other debts, which the back-end 36 percent ratio is meant to catch.

So when the calculator says a payment fits inside 28 percent, read that as necessary but not sufficient. It means the loan alone is in range. Whether the whole picture is in range is a slightly tighter question, and only your full budget can answer it.

Ways to bring the ratio down

If the check comes back over the line, you have a few real levers, and it helps to see what each one costs you:

• Borrow less. A larger down payment shrinks the loan and the payment directly. This is the cleanest fix.
• Stretch the term. A longer term lowers each monthly payment, but you pay interest for more years, so the total cost climbs. Smaller now, more overall.
• Raise the income side. Since the ratio is payment divided by income, a higher or second income moves it just as much as a smaller loan.
• Shop the rate. Even a small drop in the interest rate lowers the payment, and over a 20 year term it adds up.

Try them in the calculator. Change one input at a time and watch the ratio move, so you can see which lever does the most for your situation.

The assumptions behind the number

• The interest rate stays fixed for the whole term.
• Interest is compounded monthly on the reducing balance, the standard method.
• Every payment is equal and paid on time.
• The income you enter is gross, before tax, which is what the 28 percent rule is based on.
• The affordability check compares the loan payment only, not taxes, insurance, or your other debts.

Real loans move around these edges, so treat the output as a solid estimate, not a quote. Your lender's sanction letter is the binding number.

Questions people ask

Where does the 28 percent come from?

It is the front-end part of the long-standing 28/36 lending guideline. Housing costs stay under 28 percent of gross income, and all debts together stay under 36 percent. It is a rule of thumb, not a law, and lenders in different countries set their own limits around it.

Should I enter income before or after tax?

Before tax, the gross figure. The 28 percent guideline is defined against gross income, so using your take-home pay would make the ratio look worse than lenders calculate it.

My ratio is over 28 percent. Can I still get the loan?

Possibly. Many lenders approve higher ratios depending on your credit, savings, and other factors. The 28 percent line is about comfort, not just approval. Being over it is a signal to look closely at your budget, not an automatic no.

Why is the total interest so large?

Because a home loan runs for decades. Over 20 years, interest at a normal rate can approach or exceed the amount borrowed. Shortening the term or paying extra early are the two ways to cut it down.

References

The monthly payment uses the standard amortized loan formula, the present value of an annuity solved for the payment, as derived in OpenStax's Principles of Finance. The affordability logic follows how lenders and regulators measure a borrower's capacity: the US Consumer Financial Protection Bureau defines the debt-to-income ratio and, through its ability-to-repay and qualified mortgage rules, sets the standard that a payment must be one you can actually afford.

1. OpenStax, Principles of Finance 2e, Section 8.3, Loan Amortization. https://openstax.org/books/principles-of-finance-2e/pages/8-3-loan-amortization
2. U.S. Consumer Financial Protection Bureau, What is a debt-to-income ratio? https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/
3. U.S. Consumer Financial Protection Bureau, What is a Qualified Mortgage? (ability-to-repay standard). https://www.consumerfinance.gov/ask-cfpb/what-is-a-qualified-mortgage-en-1789/