1. What is Second Home Affordability?

Second home affordability calculates how much you can afford to spend on a second property based on your income, existing debts, and current interest rates. It helps determine your borrowing capacity for an additional property.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Income \) — Your monthly income
• \( DTI \) — Debt-to-income ratio (decimal)
• \( Rate \) — Monthly interest rate (decimal)
• \( Other Debts \) — Your existing monthly debt payments

Explanation: The equation calculates how much you can afford for a second home payment after accounting for your existing financial obligations.

3. Importance of Affordability Calculation

Details: Calculating second home affordability helps prevent overextension of your finances and ensures you maintain a healthy debt-to-income ratio when purchasing an additional property.

4. Using the Calculator

Tips: Enter your monthly income, debt-to-income ratio (typically 0.36-0.43), monthly interest rate (annual rate divided by 12), and your current monthly debt payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good debt-to-income ratio for a second home?
A: Most lenders prefer a total DTI below 43%, including both primary and second home payments.

Q2: How does interest rate affect affordability?
A: Higher rates decrease affordability as more of your payment goes toward interest rather than principal.

Q3: Should I include rental income from the second home?
A: Only if you can document consistent rental history; lenders typically discount projected rental income.

Q4: What other costs should I consider?
A: Remember to account for property taxes, insurance, maintenance, and potential vacancy periods.

Q5: How conservative should I be with these calculations?
A: It's wise to build in a buffer (10-20%) for unexpected expenses or income fluctuations.