Housing Debt Ratio Calculator

Housing Debt Ratio – An Important Parameter for Loan Appraisals

Housing debt ratio is an important yardstick for the lenders to appraise the loan servicing ability of the potential borrower. It allows the lenders to peek into the financial leverage position of the applicant.

Your housing expense ratio is a debt to income ratio measuring the percentage of your income that covers housing payments. Housing payments consist of pretty much everything in your monthly payment – principal, interest, taxes, and insurance (PITI).

There is concept of a top ratio and bottom ratio in configuring what a buyer can afford in housing expenses. The top ratio is calculated by dividing your new total monthly mortgage payment by your gross income per month. Typically, this ratio should not exceed 28%. The bottom ratio is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross income per month. Typically, this ratio should not exceed 36%.

Housing Expense Ratio Calculator

Here we present a simplified version of Housing Debt Ratio Calculator. This calculator will allow you to calculate your housing debt Ratio easily to get an idea about your ability to serve the housing loan.


Inputs Required to be Entered

Following inputs are required to be entered to run this Housing Expense Ratio Calculator.

  1. Gross Monthly Salary / Income: This is your normal monthly income. You should not deduct any taxes etc. but it should not include alimony, child support etc.
  2. Other Monthly Incomes: Other monthly income such as alimony or child support.
  3. Monthly Rent/Mortgage: This is the amount you have to shell out each month for rent or mortgage.
  4. Car Payments: The total amount you spend each month for all car payments.
  5. Credit Card Payments: The total amount you spend each month for all credit card payments.
  6. Other Loan Payments: The total amount you spend each month for all loans (not to include mortgage).
  7. Other Monthly Payments: Total of all other monthly obligations you have. (Examples are alimony, child support, legal judgment.)

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Output Results Calculated by Housing Expense Ratio Calculator

Following results will be given after calculations.

  1. Housing Debt Ratio: This is the calculated percentage of your monthly income that goes to pay for housing. If you find it to be anything lower than 28% then it is good enough.
  2. Total Debt Ratio: This is the calculated percentage of your monthly income that goes to pay all your debt (including housing). If you find it anything lower than 36-38%, then it is good enough.
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Disclaimer

Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.