Figure out much house can you can afford using excel EASY QUICK mortgage tool video

Today I will show you a quick and easy way to figure out how much house you can afford using excel. This housing market is crazy right now and you can use this tool to see how much mortgage you can safely afford.

Hey everyone today i’m going to show you a really cool and easy trick to help you figure out how much of a home mortgage you can afford if you’re like many americans right now you are out looking for a home it’s super competitive you’re probably asking yourself you know what can i what can i go in on a home you know what can i safely afford so we’re going to

Show you a very quick way to figure that out using excel in the personal finance world there is a rule of thumb or kind of a general rule that that’s pretty commonly shared it’s 28 36 rule and the rule states that you you shouldn’t spend more than 28 of your gross monthly income on housing costs so you know if you make ten thousand dollars a month you wouldn’t

Wanna spend more than twenty hundred dollars on on housing expenses and then the thirty six percent part of of the rule is that your total debt shouldn’t surpass thirty six percent of your total income so if you have credit card debt a lot of loans student loans that type of thing you wouldn’t want those expenses plus your mortgage to to surpass 3 600 a month

So that’s to keep people you know financially safe and whatnot but really when when depending deciding on how much mortgage you can afford you want to take in the whole financial picture and your personal situation so what we’re going to do is just quickly walk through how we can figure out what that that total mortgage what that home value can be and so the

First thing we need to know is you know what is your annual salary because we need to we need to break this down on a monthly basis so the first thing we’re going to do is let’s say that we make 80 000 a month so we’re going to go ahead and put that in there and then again what’s the monthly seller so very easy i get it to a monthly basis we’re going to take that

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Annual salary divided by 12 so assuming that we make 6 000 a month knowing that our payment should be or could be 28 of our gross income what we’re going to do is we are going to put and we’re going to make this kind of dynamic so we can play around with it to assess different situations so we’ll do that 28 of our gross payments so we’re going to just multiply

Our monthly salary to our uh 28 there and so this is saying that on an 80 000 salary we shouldn’t be spending more than 1866 on a mortgage payment so now that we know our payment amount what’s our max payment how much house can we actually afford so the next two things we need to do the next two steps is find out how many periods how many months are we gonna

Be paying on this on this mortgage so if you’re like many americans it’s most likely 30 years right so what we’re going to do again get it on that monthly basis so we’re just going to take the 30 years multiply it by 12 months so we have 360 periods and then rate is what is the interest rate that you’re going to have your mortgage payment locked in at so we’re

Just going to go ahead and put in 3.5 down here under rate and then again we need to get that on we need to get that on a monthly basis so we’re going to take that 3.5 percent which is an annual rate and then divide it by 12. so it’s going to give us a fraction of the three and a half percent so now we have all the different criteria to figure out how much home

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We can afford so what we do is we just hit pv which is present value we’re just looking to find out what the present value of the home is that you can afford based on these criteria so with the pv we’re just going to go ahead and hit tab and then it’s going to ask us for the criteria so what is the rate so we’re just going to select the rate that we came up

With the number of periods and hit a comma after all the stuff and then the payment the pmt is the payment amount so in per is the number of periods and rate is our interest rate and so once we have those three things we can just hit a close parenthesis and hit enter so this is giving us our our home value that we can afford and it’s showing negative and that’s

Just based on that it’s like an investment so like current your outcome you know money would be flowing out for the purchase of the home and it would be 415 000 so as you’re looking for homes and this is the criteria that that applies to you this is probably the the price range that you’d want to target again you know each individual or family is unique and so

There’s different circumstances so now what we have what we can do here is go to these highlighted cells and let’s say we want to be a little bit more aggressive you know we don’t have a lot of debts we want to spend a little bit more at home we can go ahead let’s say let’s enter 36 percent so right away our payment is bumped up and the home value we can afford

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That also jumps up to 534 over the the 400 and that 400 000 dollar mortgage amount so let’s say though however our mortgage rate instead of three and a half was four and a half percent so that’s gonna drop from the five thousand five hundred thousand dollar amount down to the 473. let’s say you know you have better you have great credit you have uh good interest

Rates three percent you’re going to be able to afford almost 570 000 so you know that’s why that great credit is so important to be able to get those great interest rates to to be able to afford more home and let’s say for example you wanted to you were feeling really aggressive you wanted to pay the home off in 15 years so then that payment amount you’re gonna

See a huge drop because that’s the less time for you to make those periods and so the the home price would be 347 000 so again you can go in here in your excel and kind of play with these numbers based on on what you have and figure out how much home you can afford and so super easy super fun to kind of get in and deep dive and understand this stuff please let

Me know if this was helpful or if there’s any other questions you have about this topic i’d be happy to to make more videos and please remember to subscribe to the excel day you

Transcribed from video
Figure out much house can you can afford using excel EASY QUICK mortgage tool video By The Excel Guy