Home Affordability Calculator

What is a home affordability calculator?

A home affordability calculator tells you whether a home fits your income before you commit to it. Most people buy with a loan, so the question is not whether you can pay the price at once. It is whether you can pay the installment every month for years, and whether you have the cash for the day you buy. This one answers both, then shows what to invest each month to have that cash ready.

What the calculator counts

• The loan installment. The EMI on the part of the price you borrow, at the rate and tenure you enter.
• Your other loans. Installments you already pay. They share the same limit, so they lower the price that fits.
• The cash on the day. The down payment plus registration, taxes and fees, which a loan does not usually cover.
• Interest over the loan. What the home really costs once the loan is paid back, not only the price on the deed.
• The highest price that fits. The most you could pay at the same down payment, rate and tenure and stay inside your limit.
• A plan for the cash. What to invest each month in a mutual fund so the down payment and fees are ready when you buy.

How the answer is worked out

The loan is the price less your down payment. The monthly installment on it is:

EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

• P is the loan amount.
• r is the interest rate for one month: the yearly rate divided by 12.
• n is the number of monthly installments: the tenure in years times 12.

The calculator adds the loans you already pay and sets the total against your limit, which is your income times the share you chose. The home fits when the total is at or under the limit. The highest price that fits is the loan that the room left under the limit can pay off, divided by the share of the price you borrow.

Example of using the calculator

This is the case the calculator opens with: a ৳ 70.00 L home bought on a ৳ 1,50,000 monthly income.

The EMI uses 84% of the limit, so this home fits with room to spare.

Why the plan saves the cash, not the price

Saving the full price of a home out of a salary can take a lifetime, and most buyers never do. A loan carries most of it. What a loan does not cover is the down payment and the registration costs, and that is the sum that has to be in hand on the day. In the example it is ৳ 26,60,000 today. If you buy in 5 years and prices rise 5% a year, it is nearer ৳ 33,94,909.

The savings plan works that sum back to a monthly amount, using the published return of the mutual fund you pick. Starting early matters twice: the monthly amount is smaller, and the money earns while it waits. If you will not borrow, switch the plan to the full price.

How to use the calculator

1. Enter your income and other loans. Use the income a bank would count, before tax, and add the installments you already pay.
2. Set how much loans may take. It starts at 40% of your income. Banks often allow more, but a lower limit leaves you room.
3. Enter the home. Add the price, the registration and fees as a share of it, and the down payment you plan to make.
4. Add the loan. Set the tenure and the rate your bank quotes. The EMI is worked out for you.
5. Read the answer. See whether it fits, how much of your limit it uses, the cash you need on the day and the highest price that fits.
6. Plan the cash. Choose how many years until you buy and a fund. The plan shows what to invest each month, and how the money builds up.

Tips for planning a home purchase

• Leave room. A home that sits right on your limit leaves nothing for a pay cut, a new loan or a repair. Aim for under 85% of the limit.
• Count the cash, not only the loan. The down payment and the fees are due before you get the keys, and a loan does not usually cover them.
• Try a longer tenure and a bigger down payment. A longer loan lowers the EMI but costs more interest. A bigger down payment lowers both.
• Start the savings early. A longer time to save means a smaller monthly amount, and the money grows while it waits.
• Ask your bank. Banks differ on the share of the price they lend and on the share of income they allow. Confirm both before you plan.

Keep reading

• Plan a monthly investment toward your down payment→
• How much should you invest through a SIP?→
• What is SIP and how does it work?→
• Can you afford a car? Check the loan the same way→

Frequently asked questions

What is a home affordability calculator?

A home affordability calculator checks whether a home fits your income. It works out the monthly loan installment (EMI), adds the loans you already pay, compares the total with the share of your income you are willing to spend on loans, and tells you whether the home is within reach. It also shows the cash you need on the day and the highest price that fits.

How much home loan can I get on my salary?

Each bank sets its own rule, but they all look at how much of your income goes to loan installments. Many allow all your installments together to take up to about half of your income. The calculator starts at 40%, which leaves more room, and lets you set your own limit. Your bank has the final say.

How is the home loan EMI calculated?

The EMI is the loan amount multiplied by the monthly interest rate and by (1 + the monthly rate) raised to the number of months, divided by that same power minus one. The loan amount is the price less your down payment, and the monthly rate is the annual rate divided by 12.

How much down payment do I need for a home?

Many banks lend roughly 70% to 80% of the price, so you pay 20% to 30% yourself, and some lenders ask for more. A larger down payment means a smaller loan, a lower EMI and less interest. Check the share your bank finances before you plan.

What costs come on top of the price of a home?

Registration, stamp duty, taxes and legal fees. They are usually paid in cash and not by the loan. The calculator asks for them as a share of the price and starts at 8%, which is a starting point and not a rule: the real figure depends on the deed, the area and the current rates, so ask your lawyer or the sub-registrar's office.

What price of home can I afford?

The calculator shows the highest price that fits your loan limit at the down payment, rate and tenure you entered, after counting the loans you already pay. For example, on a ৳ 1,50,000 monthly income with a 40% limit, 30% down and 11% over 20 years, the limit works out near ৳ 83,04,132.

Is a longer loan better?

A longer loan lowers the monthly EMI, which can bring a home inside your limit, but you pay more interest in total. Try several tenures and compare both the monthly figure and the total cost.

What interest rate should I enter?

Use the rate your bank quotes you for a home loan. Rates differ between banks and change over time, so check the current offer before you decide. The 11% the calculator opens with is a starting point, not an offer.

Do I need to save the full price of a home?

No. Most people buy with a loan, so the savings you need are the down payment and the registration costs, and the loan covers the rest. The savings plan works out what to invest each month for that cash. If you will not borrow, switch it to the full price.

How much should I invest each month to buy a home?

Choose how many years you have, and the plan shows the monthly amount that, invested in the mutual fund you pick, would grow to the cash you need by the day you buy. It uses the fund's published annual return (CAGR), the same method as the Mutual Fund Calculator. A return is not a promise, so treat it as an illustration.

Why does the cash needed go up when I wait?

Because home prices tend to rise, so the same home costs more in a few years and the down payment with it. The calculator raises the price by a yearly rate you can change, which starts at 5%, and works the goal out on the later price. A longer time to save also means a smaller monthly amount.

Which fund should I pick if I plan to buy soon?

An income fund is the steadier choice for a goal a few years away. Growth and balanced funds can fall in a short time, and there may be no time left to wait for them to recover. The savings plan opens on VIPB Fixed Income Fund for that reason, and you can pick any other fund.

Does the calculator count my other loans?

Yes. Enter the installments you already pay each month. They share the same limit as the home loan, so they lower the price that fits. Banks count them too.

Is the home affordability calculator free?

Yes. It is free to use and needs no sign-up.