A mortgage calculator is a quick and easy tool that lets you know the maximum amount of mortgage you qualify for and allows you to estimate your mortgage payments. It’s important to review your entire monthly budget to ensure this amount is comfortable and leaves room for unexpected expenses.
For example, the mortgage industry uses a formula to calculate the maximum amount one would qualify for. The answer gives us a total debt service (TDS) percentage that cannot be exceeded. This is your blended mortgage payment (principal and interest), property taxes, heat, and debt payments (credit cards, car payments and other loans) in comparison to your gross income. However, that calculation does not factor in other lifestyle costs like bills, gas, groceries, daycare, tuition, entertainment, etc and does not consider your NET (take-home) pay.
When planning the amount of mortgage you can afford – think of the bigger picture.
I never suggest that my clients become ‘house poor’ or over-commit themselves. It’s important to know your overall budget and lifestyle when deciding how much per month you want to spend on a mortgage payment.