80 15 Mortgage Calculator

The 80/15 mortgage rule is a simple guideline used by some mortgage lenders to determine how much you can afford to borrow. It suggests that you should spend no more than 80% of your gross monthly income on housing expenses (including mortgage payments, property taxes, and homeowners insurance) and no more than 15% of your gross monthly income on other debt obligations.

What is the 80/15 Mortgage Rule?

The 80/15 mortgage rule is a simplified method used by some lenders to assess your borrowing capacity. It's based on the idea that your total monthly debt obligations (including your mortgage) should not exceed 36% of your gross monthly income (80% for housing expenses plus 15% for other debts).

Important Note

While the 80/15 rule provides a starting point, it's not a strict financial rule. Lenders may use more sophisticated methods to evaluate your creditworthiness. Always consult with a financial advisor or mortgage professional for personalized advice.

Key Components

80% rule: Your total housing expenses (mortgage payment, property taxes, homeowners insurance) should not exceed 80% of your gross monthly income.
15% rule: Your total monthly debt obligations (excluding housing expenses) should not exceed 15% of your gross monthly income.
Combined total: The sum of these percentages (80% + 15%) should not exceed 36% of your gross monthly income.

Advantages

The 80/15 rule provides a simple framework for estimating your borrowing capacity. It helps you understand the maximum mortgage amount you might qualify for based on your income. However, it's important to remember that this is just a guideline and not a strict financial rule.

How to Use This Calculator

Our 80/15 mortgage calculator helps you estimate your maximum mortgage amount based on the 80/15 rule. Here's how to use it:

Enter your gross monthly income in the first field.
Enter your monthly debt payments (excluding housing expenses) in the second field.
Enter your desired monthly housing expenses (including mortgage payment, property taxes, and homeowners insurance) in the third field.
Click the Calculate button to see your results.
Review the maximum mortgage amount and other financial metrics.

This calculator provides an estimate based on the 80/15 rule. For precise mortgage approval, consult with a financial advisor or mortgage professional.

Formula and Assumptions

The 80/15 mortgage calculator uses the following formula to estimate your maximum mortgage amount:

Formula

Maximum Mortgage Amount = (Gross Monthly Income × 0.80) - Monthly Debt Payments

Where:

Gross Monthly Income is your total monthly income before taxes.
Monthly Debt Payments are your other monthly debt obligations (excluding housing expenses).

Assumptions

The calculator assumes you want to keep your total debt obligations (including mortgage) at or below 36% of your gross monthly income.
It does not account for other financial obligations like savings or retirement contributions.
The results are estimates and may vary based on your individual financial situation.

Worked Example

Let's walk through an example to see how the 80/15 mortgage calculator works.

Example Scenario

Gross Monthly Income: $5,000
Monthly Debt Payments: $300
Desired Monthly Housing Expenses: $1,200

Calculation Steps

Calculate 80% of your gross monthly income: $5,000 × 0.80 = $4,000
Subtract your monthly debt payments: $4,000 - $300 = $3,700
This $3,700 is your maximum mortgage amount based on the 80/15 rule.

Verification

Let's verify the calculation:

Total monthly debt obligations: $300 (other debts) + $1,200 (housing) = $1,500
Percentage of gross income: $1,500 / $5,000 = 30% (which is below the 36% limit)

Frequently Asked Questions

What is the 80/15 mortgage rule?: The 80/15 mortgage rule is a guideline suggesting that your housing expenses should not exceed 80% of your gross monthly income and your other debt obligations should not exceed 15% of your gross monthly income.
Is the 80/15 rule a strict financial rule?: No, the 80/15 rule is a simplified guideline. Lenders may use more sophisticated methods to evaluate your creditworthiness. Always consult with a financial advisor or mortgage professional for personalized advice.
Can I use the 80/15 rule to calculate my exact mortgage approval?: The 80/15 rule provides an estimate. For precise mortgage approval, consult with a financial advisor or mortgage professional who can consider your complete financial situation.
What if my housing expenses exceed 80% of my income?: If your housing expenses exceed 80% of your income, you may need to reduce your housing expenses or increase your income to qualify for a mortgage. Consider downsizing, negotiating lower housing costs, or finding additional income sources.
Does the 80/15 rule apply to all types of mortgages?: The 80/15 rule is a general guideline and may not apply to all types of mortgages. Some lenders may have different criteria based on your individual financial situation and the type of mortgage you're applying for.