75 15 10 Mortgage Calculator
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Reviewed by Calculator Editorial Team
The 75/15/10 mortgage rule is a simple method for determining how much you can afford to borrow when purchasing a home. This calculator helps you apply this rule to your financial situation.
What is the 75/15/10 Mortgage Rule?
The 75/15/10 rule is a guideline used by mortgage lenders to determine how much of a home's purchase price a borrower can afford. The rule is based on three key factors:
- 75% of your gross monthly income - This represents your maximum monthly mortgage payment.
- 15% of your gross monthly income - This represents your maximum monthly debt payments (excluding the mortgage).
- 10% of your total monthly income - This represents your maximum monthly savings.
By following these guidelines, you can ensure that your mortgage payments, other debts, and savings are all within reasonable limits of your income.
How to Use This Calculator
To use the 75/15/10 mortgage calculator, follow these simple steps:
- Enter your gross monthly income in the first field.
- Enter the total monthly debt payments (excluding the mortgage) in the second field.
- Enter your desired monthly savings in the third field.
- Click the Calculate button to see your results.
The calculator will show you your maximum mortgage payment, the amount you can afford to borrow, and a breakdown of your financial commitments.
Formula Explained
The 75/15/10 rule is based on the following formulas:
Maximum Monthly Mortgage Payment
75% of your gross monthly income
Formula: Maximum Mortgage Payment = 0.75 × Gross Monthly Income
Maximum Monthly Debt Payments
15% of your gross monthly income
Formula: Maximum Debt Payments = 0.15 × Gross Monthly Income
Maximum Monthly Savings
10% of your gross monthly income
Formula: Maximum Savings = 0.10 × Gross Monthly Income
Total Monthly Commitments
The sum of your mortgage payment, debt payments, and savings
Formula: Total Commitments = Maximum Mortgage Payment + Maximum Debt Payments + Maximum Savings
Maximum Loan Amount
Your maximum mortgage payment multiplied by the number of months in the loan term
Formula: Maximum Loan Amount = Maximum Mortgage Payment × (Loan Term in Years × 12)
Worked Example
Let's say you have a gross monthly income of $5,000. Using the 75/15/10 rule:
| Category | Calculation | Amount |
|---|---|---|
| Maximum Monthly Mortgage Payment | 75% of $5,000 | $3,750 |
| Maximum Monthly Debt Payments | 15% of $5,000 | $750 |
| Maximum Monthly Savings | 10% of $5,000 | $500 |
| Total Monthly Commitments | $3,750 + $750 + $500 | $5,000 |
| Maximum Loan Amount (30 years) | $3,750 × 360 | $1,350,000 |
This means you can afford a mortgage payment of $3,750 per month, which would allow you to borrow up to $1,350,000 for a 30-year loan.
Frequently Asked Questions
- What is the 75/15/10 mortgage rule?
- The 75/15/10 rule is a guideline used by mortgage lenders to determine how much of a home's purchase price a borrower can afford. It's based on three key factors: 75% of your gross monthly income for mortgage payments, 15% for other debt payments, and 10% for savings.
- How accurate is the 75/15/10 rule?
- The 75/15/10 rule provides a general guideline, but it's not a strict rule. Lenders may adjust the percentages based on your individual financial situation. It's always a good idea to consult with a mortgage professional for personalized advice.
- Can I use the 75/15/10 rule for a home purchase?
- Yes, the 75/15/10 rule is commonly used by mortgage lenders to assess a borrower's ability to repay a mortgage. It helps determine the maximum amount you can afford to borrow based on your income and financial commitments.
- What if my debt payments exceed the 15% limit?
- If your debt payments exceed the 15% limit, you may need to reduce your debt or increase your income before applying for a mortgage. Lenders will consider your total debt-to-income ratio when evaluating your loan application.
- Is the 75/15/10 rule the same for all lenders?
- The 75/15/10 rule is a common guideline, but different lenders may have their own criteria. Some lenders may use different percentages or additional factors when evaluating your loan application. It's important to check with your lender for specific requirements.