How to calculate what size home loan you can afford

Buying a house is a huge decision that comes with even greater responsibility because a typical home loan can take up to 20 years to repay. You must be certain you can continue to make your monthly payments for the duration of the loan. The logical starting point is to work out how much you can afford to pay every month, and then calculate what size loan would have that monthly repayment.

And remember, you can lower the amount you need to borrow if you put down a deposit. It’s common to put down 10% or more of the value of the house. A 10% deposit on a R1 million home is R100,000 and will make your monthly repayments about 10% lower. This can make your loan more affordable.


Your monthly repayments should become more affordable over the term of your loan, if interest rates remain stable


All you need to do now is calculate the size of the home loan you can get for that amount. Nedbank offers a quick and easy affordability calculator that you can use. You'll be asked to enter your monthly household income before tax, and be shown the monthly instalment, plus the size of the bond, that you can afford.


Pre-approval

You’ll get the most comprehensive picture of what you can afford by using our preapproval tool. Similar to the affordability calculator, you’re given the opportunity to add the income you earn, as well as your monthly household expenses. At this stage you can also add extra information about the property you’re looking to buy, such as its location, whether it’s your primary home, a holiday house or a buy-to-let property. You can then enter how much you need to borrow to buy your property, and the size of the deposit you’re putting down. Once you’ve entered this information, you’ll be presented with a summary of the home loan size you could qualify for, costs involved and the monthly repayment amount.

Something else to bear in mind is that there are other costs involved when you buy a house. Use our bond and transfer cost calculator to get an estimate of these upfront home ownership costs, but others like the cost of moving aren’t always apparent. These other expenses can add up quickly and put a dent in your budget if you’re not sufficiently prepared.

Your monthly repayments should become more affordable over the term of your loan, if interest rates remain stable, because your monthly income tends to increase as you move to higher-paying jobs in your career. Good luck with your house hunting, and be sure to use the tools mentioned here so that you get an accurate picture of all the costs involved.