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### How to calculate a property’s mortgage in 2 minutes

Whether you’re investing in property or buying your own home, one of the key considerations will be your budget.

You need to know how much you can afford to repay each week, to work out how much you can spend on a property overall.

You can go to your bank or lender for pre-approval to get a genuine assessment of your borrowing power. But before you reach this stage, it’s great if you can start your property shopping with an idea of how much you’ll reasonably be able to spend.

It’s actually very easy to calculate this amount with a simple formula.

You just calculate the cost of a mortgage by the average current interest rate.

That is:

[Mortgage amount] x [interest rate] / 52 weeks.

For instance, let’s say you’re looking at a property priced at \$450,000.

If you’re borrowing 90% (with a deposit of \$45,000) you will have a loan of \$405,000.

With current interest rates hovering between 3.99-5.5%, you’ll pay an average interest rate of 4.75%.

\$405,000 x 4.75% = \$19,240 per year in interest.

Divide this by 52 weeks and you get \$370 per week.

If you’re paying an interest only loan on an investment property, then the full cost of your weekly mortgage repayment is \$370.

If you’re looking at getting a principal and interest loan, you’ll need to factor in around a 30% premium for the principal part of your loan.

In our example, this would push your weekly mortgage put to around \$480 per week.

These calculations are just rough estimates, of course, but they give you a good indication of how much you can afford to spend when you go property shopping!

Below are some more examples: How much can you afford to borrow and how much can you afford to spend on your investment property or new home?