Money tool
How much would a lender actually lend?
Not what you could technically repay — what the ratios lenders work to will allow, and which of those limits is the one holding you back.
- Last reviewed
- Method
- Income multiples and debt-to-income ratio · the tests lenders apply
- Your figures
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Before tax, which is what these ratios are measured against.
Car finance, personal loans, card minimums, student loan payments.
Car loans commonly run 6-9%; personal loans higher
The ratios
The long-standing 28/36 guideline. FHA loans run nearer 31/43, and automated underwriting can stretch further with a strong file.
You could borrow about
$83,353
repaying $1,680 a month for 5 years
$1,680
Monthly payment
$16,959
Interest over the term
1.2x
Times yearly income
The housing ratio is the binding limit, at 28% of income. Your other debts are not what is holding this back.
What a lender will allow and what is comfortable are different questions. The ratios say nothing about childcare, commuting, insurance or a year of lost income — and a payment sized to the maximum leaves no room for any of them. Borrowing below the limit is not a wasted opportunity.
A guide, not a quote. Lenders decide this, not calculators. Your credit history, how your income is earned, your deposit and the stress rate the lender applies will all move the real answer, usually downwards.
How this works
The two ratios a lender applies
max payment = min( income × housing% , income × total% − existing debts )
- The classic guideline is 28/36: housing ≤ 28% of gross monthly income, all debt ≤ 36%
- The smaller of the two caps is the one that binds
- That payment is then run back through the loan formula to give an amount
Lenders do not start from the price
It is natural to ask what you can afford to buy. A lender asks something narrower: what monthly payment your income supports, after everything else you already owe. The amount they will lend is simply whatever that payment buys at the current rate and term.
This is why two people with the same income are offered very different amounts, and why clearing a small monthly commitment can raise a borrowing limit by far more than its balance suggests.
A worked example
Monthly income of 100,000, with 10,000 a month already going to other debts, at 9% over 20 years.
The housing cap is 28% of 100,000, which is 28,000. The total-debt cap is 36% of 100,000 less the existing 10,000, which is 26,000. The smaller binds, so the usable payment is 26,000 — and the limit here is total debt, not housing.
Run 26,000 back through the payment formula and it supports a loan of about 2,889,769.
Now clear the other debts. The total-debt cap rises to 36,000, the housing cap of 28,000 becomes the binding one, and the loan rises to about 3,112,059. Removing 10,000 a month of commitments added roughly 222,000 of borrowing power — and any further repayment would add nothing at all, because housing is now the limit.
What a lender will add that this does not
The ratios are the frame, not the decision.
- Property taxes, building insurance and service charges usually count inside the housing ratio, which lowers the loan the same income supports.
- The deposit changes the risk and often the rate offered.
- Credit history, employment type and the length of that employment all move the answer, sometimes decisively.
- Many lenders stress-test at a rate above the one you are offered, to check the payment survives a rise.
Questions people ask
Where does 28/36 come from, and is it still used?
It is a long-standing conventional guideline rather than a law, and lenders routinely approve above it. Government-backed programmes in the United States commonly run 31/43 and stretch further with compensating factors, while Indian lenders often work from 40–50% of net rather than gross income. That is exactly why the ratios on this page are inputs you can change rather than fixed constants.
Should I borrow the maximum?
The maximum is a ceiling derived from ratios, not a recommendation. It assumes your income holds, the rate behaves and nothing expensive goes wrong. Borrowing at the ceiling leaves no room for any of those, and the ratios make no allowance for how you would like to live.
Gross or net income?
The 28/36 convention uses gross — income before tax. Some markets and many sensible household budgets work from net instead, which gives a noticeably smaller and often more realistic answer. Whichever you enter, make sure the ratio you pair it with was written for the same thing.
Why did clearing a small debt help so much?
Because the total-debt cap subtracts existing payments directly. Removing a monthly commitment hands that full amount back to the available payment, which is then multiplied up by the loan formula into a much larger figure. It stops helping the moment the housing ratio becomes the binding limit.
Method and figures last reviewed . Every worked example here is produced by the same calculation the page runs — enter the same inputs above and the numbers will match.