Loans & Mortgages
The two caps
The front-end and back-end limits on the monthly payment.
The Formula
Housing cap = 0.28 x income; Debt cap = 0.36 x income - debts
The front-end and back-end limits on the monthly payment.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| I | Gross monthly income | currency | Income before tax. |
| B | Other debts | currency | Non-housing monthly payments. |
What Each Symbol Means
Icurrency
Gross monthly income
Income before tax.
Bcurrency
Other debts
Non-housing monthly payments.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate home affordability page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Home Affordability, filed under Finance. Every number the guide produces comes from substituting into this one line.