Working backward from your budget? Use this backwards mortgage calculator to find out exactly how much house you can afford based on the monthly payment you are comfortable making.
Backwards Mortgage Calculator
Backwards Mortgage Calculator Formula
To determine the maximum loan amount based on a fixed monthly payment, we rearrange the standard mortgage amortization formula to solve for Principal (P):
Variables
- P: Maximum Loan Amount (Principal).
- M: Desired Monthly Payment.
- i: Monthly Interest Rate (Annual Rate / 12).
- n: Total Number of Payments (Years × 12).
Related Calculators
- Home Affordability Calculator
- Debt-to-Income Calculator
- Standard Mortgage Calculator
- Income Required Calculator
What is a Backwards Mortgage Calculator?
A backwards mortgage calculator (often called a “How Much House Can I Afford” calculator) reverses the traditional calculation process. Instead of starting with the home price to find the payment, it starts with your budget.
This approach is crucial for responsible financial planning. By setting your budget ceiling first, you can filter your home search to properties that align with your financial comfort zone, rather than stretching to meet a listing price.
How to Calculate Backwards Mortgage (Example)
Suppose you can afford $1,800/month for Principal & Interest:
- Monthly Budget (M): $1,800.
- Interest Rate (r): 6.0% (0.005 monthly).
- Term (n): 30 years (360 months).
- Calculation: The formula determines that an $1,800 payment can support a loan of approximately $300,227.
Frequently Asked Questions (FAQ)
This specific calculation solves for the Loan Principal based on a P&I payment. To get a true “affordability” number, you should subtract estimated monthly taxes and insurance from your total budget before entering the amount into the “Desired Monthly Payment” field.
Interest rates have a massive impact. As rates rise, the amount of principal your monthly payment can support decreases. A 1% increase in rates can reduce your purchasing power by roughly 10%.
No, this calculates the Loan Amount. To find your maximum Purchase Price, you must add your available cash down payment to the loan amount result.
Yes. Simply change the Loan Term input to 15 years. You will find that for the same monthly payment, you can borrow less money on a 15-year term compared to a 30-year term, but you will pay significantly less interest.