Home loan affordability calculator

What is a home loan affordability calculator?

Mozo’s home loan affordability calculator is a budgeting tool that helps you estimate how much you could borrow on a home loan (i.e. your borrowing power).

Using your income and expenses, the calculator tests your finances and shows you how your lifestyle affects what you can afford to spend on a home.

The calculator considers typical homebuyer expenses like the initial deposit, loan term, monthly repayments, interest rates, taxes like stamp duty, and lenders’ mortgage insurance, and lays out all these costs in a simple, easy-to-read way.

All you need to do is simply plug in the numbers and go!

How does a home loan affordability calculator work?

To use Mozo’s home loan affordability calculator, you’ll need to have some basic information about your living expenses and salary on hand. The more specific you are, the better!

For instance, you will need the following:

• Your yearly income, before tax.
• Your living costs (including food, utilities, mobile and broadband, etc.).
• The loan term you’re considering (usually ranges from 20 to 30 years).
  

Once you have this information, plug the numbers into the relevant fields. The calculator will then show you how much you can afford, with a helpful summary of hidden costs to consider.

Need help determining what your living expenses are? Use Mozo’s budget calculator to break it all down in a handy spreadsheet, or download a budgeting app to do it for you.

Pros and cons of a home loan affordability calculator

Like any financial tool, a home loan affordability calculator isn’t all-powerful. While it can be a valuable and free way to estimate your borrowing power, it also has some key limitations.

Let’s discuss the pros and cons of using a home loan affordability calculator.

Pros

• Estimates your borrowing power. If you’re new to your home loan journey or have recently made some lifestyle changes (like a new job), the affordability calculator can give you a basic estimate of how much you can afford to borrow.


• Lets you try multiple scenarios. The affordability calculator is flexible, meaning you can change inputs and see how different scenarios work. How does cutting back on living costs affect your borrowing power? The calculator can tell you!


• Useful when researching home loans. Knowing how much you can afford to borrow is helpful information when researching and comparing home loans and buying houses. You know how high you can go or what you must do to get there.
  

Cons

• Only gives a rough estimate. A financial calculator is only as good as the numbers you give it. But even if you plug in your exact living expenses and income, the affordability calculator can’t predict your future income/expenses. Take it just as an estimate.


• Doesn’t consider everything lenders check, like your credit score, existing debts, or serviceability limits. Real lenders will put your home loan application through a robust and thorough vetting process to ensure you can finance your desired loan.


• May not include all homeowning costs, like maintenance, home insurance, and any extra repayments you may make during your loan term.

These drawbacks don’t mean the home loan affordability calculator can’t be useful; they mostly just show you where it may have some blind spots.