| |
 |
|
| |
What you can afford is different from what you can buy. |
|
| |
|
|
| |
 |
If you can put up a 10% down payment on that $200,000 house, a mortgage lender can usually be found to give you a $180,000 loan to buy the house. |
|
| |
|
|
|
| |
|
But unless you like living dangerously, the monthly cost of home ownership had better fit comfortably within your monthly income. |
|
| |
|
|
| |
Monthly cost of home-ownership:
A good number for deciding what you can afford. |
|
| |
Yes, you saw a similar calculator on our Down Payment page
but this one includes maintenance and does after-tax as well as pre-tax payments |
|
| |
|
 |
| |
|
|
| |
|
|
| |
 Note - Monthly cost of home-ownership ignores non-house expenses:
- Food and Clothing
- Savings for retirement
- Savings for vacations and recreation
- Other financial goals, such as starting a business
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
| Mortgage lenders are more than happy to tell you how much you can borrow (our mortgage size estimator might be quicker). |
| |
 Danger: mortgage lenders tell how much they will lend. They can't tell you what you can afford because their calculation considers current income and current debt and not much else. |
| |
| Most of us need to focus on mortgage amounts less than the maximum a mortgage lender will lend. Unless confident that your income will be increasing sharply, don't accept a mortgage more than 80% of the maximum that mortgage lenders will give.
If lenders are willing to loan $160,000, plan on a $130,000 mortgage (about 80% of the $160,000) and a house costing no more than $155,000.
| No, this won't be your dream house. The dream house comes later, ...after you have saved more cash and built up your income. |
|
| |
|
|
| |
|
|
| |
|
Monthly Mortgage Payment
|
We assume a fixed rate mortgage for a 30 year term at an interest rate of 7.0% . You can change the term to 20 years or 15 years, and you can change the interest rate to match current rates.
|
| |
| Return to top |
|
|
| |
|
|
| |
|
|
| |
|
Monthly Property Tax
|
On average, property taxes are 1.5% of the property's purchase price per year ($1,500 per year for a $100,000 house, or $125 per month). If your town has higher than average taxes you can move our 1.5% up in increments to 2.0%.
Check with the county tax office (listed in government pages of local phone directory) to get exact rates in the town where you plan to live. |
| |
| Return to top
|
|
|
| |
|
|
| |
|
|
| |
|
Monthly Insurance
|
Your mortgage lender will require you to have home insurance, and in any case you will want to cover the cost of rebuilding your home should it be destroyed by fire or other disaster. We estimate monthly home insurance at .036% of the purchase price ($36 per month for a $100,000 house).
You can adjust our .036% down to .032% or up to .04% |
| |
| Return to top
|
|
|
| |
|
|
| |
|
|
| |
|
Monthly Maintenance
|
We estimate annual maintenance cost at 1% of the purchase price ($1,200 per year or $100 per month for a $120,000 house). Actual maintenance cost for the first several months may be zero but eventually you will have to repair or replace some part of the property
You might increase our 1% to 1.5% to allow a monthly amount for improvements like adding a deck or putting in new kitchen cabinets. |
| |
| Return to top
|
|
|
| |
|
|
| |
|
|
| |
|
Monthly Tax Savings
|
We estimate tax savings by multiplying your federal tax rate by your monthly mortgage payment, ( for the first few years mortgage payments are almost all tax deductible interest).
"Almost"," you say.
Yes, but the calculation ignores deductible property taxes. The two "errors" cancel to leave an accurate estimate of monthly tax savings.
Monthly tax savings are real. We show them as negative because the savings must be subtracted from monthly pre-tax cost to get the monthly after-tax cost of home ownership.
|
| |
| Return to top
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
|
