The 28/36 Rule: How Much House You Can Really Afford

• 28% — the “front-end” ratio. Housing costs only: mortgage principal and interest, property tax, home insurance, and any HOA fee. Lenders call this PITI.
• 36% — the “back-end” ratio. Housing plus every other monthly debt: car loans, student loans, personal loans and credit card minimums. Groceries, utilities and subscriptions don't count.

Both use gross income — before tax. That's the detail that catches people out, and it's why a budget that passes the rule can still feel tight.

Say a household earns $90,000 a year and pays $400 a month on a car loan.

1. 1
   Monthly gross income: $90,000 ÷ 12 = $7,500.
2. 2
   Front-end limit: 28% × $7,500 = $2,100 for housing.
3. 3
   Back-end limit: 36% × $7,500 = $2,700 for all debts. Minus the $400 car loan leaves $2,300 for housing.
4. 4
   The lower of the two wins: $2,100 a month for housing.

Turning that $2,100 into a house price depends on the mortgage rate, your deposit, and local property tax. With $40,000 down, a 6.5% 30-year rate, 1.1% property tax and $1,500 a year of insurance, it works out to a home of roughly $308,000.

If you have little other debt, the 28% housing limit decides your budget. Once car and student loans pass about 8% of your income, the 36% total takes over — every $100 a month of other debt cuts your housing budget by $100. That's why paying off a car loan before applying can raise what you're approved for by more than you'd expect.

• UK: lenders start from an income multiple. Most cap borrowing at around 4–4.5 times your annual income, with a smaller number going to 5–6 times for high earners or certain professions. They then run their own affordability checks on your spending.
• Canada: lenders use similar debt-service ratios and a mortgage stress test, checking you could still pay at a higher rate than the one you're offered.
• Australia: banks assess “serviceability” — your income against living costs and debts — using a buffer rate above the actual loan rate.

The affordability calculator shows your loan-to-income multiple alongside the result, so you can sanity-check it against the UK-style rule too.

The 28/36 rule describes a ceiling, not a target. It doesn't know about childcare, a long commute, or the fact that you'd like to save for retirement. A few checks worth doing before you commit to the top of your range:

• Work the payment out against your take-home pay. Many people are comfortable when housing is 25–30% of net income.
• Budget 1–2% of the home's value a year for maintenance; it won't show up in any lender's ratio.
• Keep an emergency fund after the deposit and closing costs — not instead of them.

Once you have a price range, the mortgage calculator shows the full monthly cost, and rent vs buy helps decide whether buying now makes sense at all.