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Home Loan Eligible Amount Calculator

Loan Amount Formula:

\[ P = \frac{PMT}{r} \times \left(1 - (1 + r)^{-n}\right) \]

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1. What is the Loan Amount Formula?

The loan amount formula calculates the maximum principal amount (P) you can borrow based on your affordable monthly payment (PMT), interest rate (r), and loan term (n). It's derived from the standard loan payment formula solved for principal.

2. How Does the Calculator Work?

The calculator uses the loan amount formula:

\[ P = \frac{PMT}{r} \times \left(1 - (1 + r)^{-n}\right) \]

Where:

Explanation: The formula calculates the present value of a series of future payments discounted by the interest rate.

3. Importance of Loan Amount Calculation

Details: Knowing your eligible loan amount helps in budgeting and home shopping. It ensures you look at properties within your financial reach and helps prevent overborrowing.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rate, and desired loan term. Be realistic about what you can afford monthly, considering taxes, insurance, and other expenses.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates principal and interest only. You'll need to account for property taxes and insurance separately.

Q2: How does credit score affect this?
A: Your credit score influences the interest rate you qualify for, which directly impacts the loan amount.

Q3: What's a good debt-to-income ratio?
A: Most lenders prefer your total monthly debt payments (including mortgage) to be ≤36% of gross income.

Q4: Should I borrow the maximum amount?
A: Not necessarily. Consider future expenses, job stability, and emergency savings before maxing out.

Q5: How accurate is this calculator?
A: This provides a good estimate, but actual loan amounts depend on lender policies, credit history, and other factors.

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