Home
Back
Affordability Formula:
| From: | To: |
Self employed mortgage affordability refers to the maximum mortgage amount that a self-employed individual can qualify for based on their net profit. Lenders typically use a multiplier (often 4.5 times the net profit) to determine borrowing capacity.
The calculator uses the affordability formula:
Where:
Explanation: This calculation provides an estimate of the maximum mortgage amount a self-employed individual might qualify for based on their business income.
Details: Understanding mortgage affordability helps self-employed individuals plan their home purchase, set realistic budgets, and prepare necessary documentation for mortgage applications.
Tips: Enter your annual net profit in dollars. Ensure this figure accurately reflects your business income after all expenses and taxes.
Q1: Is the 4.5 multiplier standard for all lenders?
A: While 4.5 is commonly used, different lenders may use slightly different multipliers based on their risk assessment and current market conditions.
Q2: What documentation is typically required for self-employed mortgage applications?
A: Most lenders require 2-3 years of tax returns, profit and loss statements, and business bank statements to verify income.
Q3: Can I include other sources of income in this calculation?
A: This calculator focuses on business net profit. Other income sources may be considered separately by lenders in the overall affordability assessment.
Q4: How often should I recalculate my mortgage affordability?
A: Recalculate whenever your business financial situation changes significantly, or at least annually when reviewing your financial planning.
Q5: Are there additional factors that affect final mortgage approval?
A: Yes, lenders also consider credit history, existing debts, down payment amount, and property value when making final approval decisions.