How it works
The calculator runs three steps:
- Max housing expense. Divide monthly rent by your target ratio. That is the most the full monthly payment can be.
- Max loan payment. Subtract monthly taxes, insurance and HOA. What remains is the largest principal and interest (or interest-only) payment the rent supports.
- Max loan. Convert that payment into a loan amount using the present-value formula above, where
ris the annual rate you enter divided by 12 andnis the number of monthly payments. For interest-only, the loan is simply the payment × 12 ÷ the annual rate.
Worked example
A rental brings in $3,000 a month and you want to clear a 1.25 ratio. Taxes are $3,600 a year ($300 a month) and insurance $1,800 a year ($150 a month).
| Step | Math | Result |
|---|---|---|
| Max housing expense | $3,000 ÷ 1.25 | $2,400 |
| Less taxes & insurance | $2,400 − $450 | $1,950 |
| Max loan | $1,950 converted at your rate and term | depends on your quote |
The final step is deliberately left to your own quote: enter the rate you were offered and the calculator converts the $1,950 payment into a loan amount. Notice how sensitive the answer is — a higher rate or a shorter amortization shrinks the supportable loan, and an interest-only structure enlarges it. Toggle between them to see the spread.
When leverage binds instead
Coverage is only one ceiling. Programs also cap the loan as a percentage of value. Enter the property value and an LTV you want to test, and the calculator reports whichever limit is lower. On high-rent, lower-price properties, leverage often binds first; on expensive properties with modest rents, coverage usually does. If you are refinancing, compare the result with the Cash-Out Equity calculator to see how much cash that loan actually produces.