Loan Affordability Calculator

A payment is a stream, and the loan is its present value

An ordinary loan calculator takes an amount and produces a payment. This runs the same relationship the other way: your monthly budget is treated as a stream of payments, and the maximum loan is the present value of that stream discounted at the loan rate over the term.

That inversion is the useful one when you are shopping rather than confirming. It answers the question a borrower actually has — what can I take on — instead of the question a lender asks after the amount has already been chosen.

Stretching the term raises the ceiling and the total bill together

Extending the tenure lets the same monthly budget support a larger loan, because the payments are spread over more periods. The increase is not proportional: each additional year adds less to the borrowing capacity than the one before it, since the later payments are discounted hardest.

The total interest moves the other way and keeps climbing. Comparing a twenty-year and a thirty-year run at the same budget usually shows a modestly larger loan bought with a substantially larger interest bill, which is the trade the tenure decision actually is.

A point on the rate is worth tens of thousands of borrowing power

Because the rate discounts every future payment, a change of one percentage point moves the maximum loan by considerably more than one percent. On a long tenure the effect is largest, as the discounting compounds across the greatest number of periods.

This is worth testing before an offer is accepted rather than after. Running the same budget at the rate you have been quoted and at a point either side shows how much of your apparent capacity is actually a bet on the rate holding.

Affordability to you is not the same as eligibility to them

This calculates what a payment supports arithmetically. A lender adds tests this does not model: a debt-to-income ratio covering your other obligations, a credit assessment, income documentation, and a loan-to-value limit tied to whatever secures the loan.

The practical gap is usually the ratio test. Many lenders cap total debt servicing at around 40% to 50% of gross income, so a budget that is affordable in your own accounting can still exceed what the underwriting will approve.

Sources & References

Figures on this page are checked against primary, authoritative sources. Links open in a new tab.

• What is a debt-to-income ratio? — total monthly debt payments ÷ gross monthly incomeConsumer Financial Protection Bureau · verified 2026-06-04
• Figuring out what you can afford to borrow — weighing income against monthly obligationsConsumer Financial Protection Bureau · verified 2026-06-04

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