How much house can I afford?
Lenders answer a different question than the one you are asking. They calculate the maximum they are willing to lend. You need to know what you can comfortably repay for the next twenty-five years, and those two numbers are rarely the same.
The rule of thumb, and what it actually means
The most widely used guideline is the 28/36 rule. No more than 28% of gross monthly income goes to housing, and no more than 36% goes to total debt including the housing payment. On a gross income of $6,000 a month, that is $1,680 for housing and $2,160 for all debt combined.
Both halves matter. The first stops housing crowding out everything else. The second catches the case where the mortgage looks fine in isolation but a car loan and a student loan are already consuming the room.
A second, blunter rule: total borrowing of roughly 3 to 4.5 times gross annual income. Lenders in many countries cap somewhere in this band by regulation. It is cruder than the 28/36 test but harder to game, because it ignores the term of the loan.
Why "maximum approved" is a trap
Lenders assess your capacity to repay, not your quality of life. Their model does not include the holiday you take every year, the parent you help support, the career break you might want, or the fact that you would like to save something.
The 28% ceiling is a ceiling, not a target. Borrowing at 22% instead of 28% of income on that same $6,000 leaves an extra $360 a month — around $130,000 of investment value over twenty-five years at 7%. That is the real price of taking the maximum.
There is also a stability argument. A payment set at the edge of affordability assumes your income only rises. Job loss, illness, a new child and rate rises on a variable loan all arrive uninvited, and a payment with no slack turns any of them into a crisis.
The costs that never appear in the headline figure
The mortgage payment is not the cost of owning a home. Budget for all of the following:
- Property tax and insurance — in some countries bundled into the monthly payment, in others billed separately, but always real.
- Maintenance — a common planning figure is 1% of the property value a year. It arrives unevenly: nothing for three years, then a roof.
- Service charges or association fees — for apartments, often substantial and rarely fixed.
- Transaction costs — stamp duty, registration, legal fees and agent commissions can consume several percent of the price, which matters enormously if you might move within five years.
Work it backwards instead
Rather than asking what you can borrow, decide what monthly payment you are comfortable with, then solve for the price. Take your current rent as the anchor. If you are paying $1,400 comfortably, a total housing cost of $1,600 is a modest stretch; $2,400 is a different life.
Put that comfortable payment into the mortgage calculator, add your realistic deposit, and read off the price. The number is usually lower than what a lender would approve, and it is the one worth acting on.
The deposit changes more than the price
A larger deposit does three things at once: it lowers the amount borrowed, it often unlocks a better interest rate, and above certain thresholds it removes mandatory mortgage insurance. The middle effect is easy to underestimate — a rate that is half a point lower saves tens of thousands over a full term.
The counterweight is liquidity. Cash inside a house is difficult and slow to retrieve. Emptying your emergency fund into a deposit means the first unexpected expense goes onto a credit card at a far worse rate than your mortgage. Keep three to six months of expenses outside the purchase.
Frequently asked questions
What percentage of income should go to a mortgage?
The common guideline is no more than 28% of gross monthly income on housing and no more than 36% on total debt including housing. These are ceilings rather than targets, and borrowing meaningfully below them buys flexibility that is worth more than the extra square footage.
Is it better to make a bigger down payment or keep cash?
Keep three to six months of essential expenses accessible, then put surplus toward the deposit. Cash committed to a house is slow and expensive to retrieve, and running an emergency fund down to zero means the next unexpected bill goes on a credit card at a far higher rate.
Does the loan term change what I can afford?
It changes the monthly payment and therefore what a lender will approve, but it does not change what the house costs you. A longer term lowers the payment and raises the total interest substantially. Compare the total-of-payments figure, not just the monthly one.