So you’ve worked out how much you are happy to repay, and you know how long you want to take your home loan out for; but what about how much you want to borrow?

How much can you borrow to pay your home loan off in five to ten years (or however long you want to take it out for)?

The ultimate answer is, it’s up to you.

Use the calculator as a guide to work out how much you can borrow, but in the end it’s up to you to decide how much you want to borrow given your situation, how much of a deposit you have, the current market trends (e.g., interest rates, property prices) and how much your lender would be willing to lend you.

If you already have a home loan, it’s not all lost, you can still use this calculator to plan how much longer you want to pay it off in.

If you don’t have a home loan yet, this is where it starts to get interesting.

I have created the ‘Reverse Home Loan Calculator’ specifically for this purpose. I created this calculator because there was nothing like this in the market at the time; and it’s what I wanted to use. It’s how I wanted to work out what we could borrow. It helps you to work out the maximum amount of money you can borrow if you know:

1. how much you can repay (per week, fortnight or month); and
2. how long you want to repay your home loan for (e.g., 5 years).

This was not a calculator I had found anywhere else. I mean, who’s going to give you the formula to work out for yourself your own maximum home loan based on how much you can repay and how long YOU want to take your home loan out for! Who would give you the calculator that let’s you be in control of your own home loan!

This calculator also gives you the total interest you will repay in that time so you can work out if this fits with your own desire for how much interest you are willing to pay; plus, it has another in-built feature—the Principal-to-Interest split (remember from Chapter 14 where we talked about the 50% rule). That’s in there too so you don’t have to work it out for yourself. And you don’t have to be a math guru to work it out like a pro.

Ahhhhh, you’re welcome!

To start using the calculator go to payitinfive.com and look under ‘Calculator’ to use this online or go to payitinfive.com/gifts to download an excel version of the ‘Reverse Home Loan Calculator’. This is free to use.

Check it out! I use it all the time.

But I must warn you, it can become a bit of an obsession when you start playing around with this. Before we purchased our first property I used it so many times; to check and double check how much we could borrow in order to pay our home loan off in five years. And that’s exactly what I hear from people who I share it with. They check and they double check. They review their plans and refine their goals.

Once you’ve opened the calculator, type in how much you can repay (and over which period, e.g., per week, fortnight or month), add in the current expected interest rate or the one your lender gave you (don’t worry if you haven’t spoken with a lender yet, I’ll get to that soon too). I always add an extra percent or two to the interest rate estimate to give myself a conservative or more realistic estimate of a home loan in case interest rates rise during that period (this will give you a bit of a buffer); and then add in the number of years you want to pay your home loan off in.

And voilà… it’s that easy.

There you have it; the maximum home loan amount you can borrow if you want to pay your home loan off in a certain number of years (based on how much you can repay regularly).

Isn’t it great!

I know I am a bit biased because I made it and I use it all the time, but I really just love it. When you create your own personal maximum home loan amount based on what you can repay and how long you want to pay it off for, YOU remain in control.

What if the total interest is too high?

If the total interest you would pay over the full life of the home loan is higher than you would like it to be, consider:

1. paying off the same home loan amount over a shorter period of time (e.g., minus one or more years). If you do this, you need to be realistic. Ask yourself: would you be able to meet the repayments necessary to pay it off in that shorter amount of time? or
2. get a smaller home loan amount.

What if I want to borrow more money?

Thinking about your maximum home loan amount, is your maximum home loan amount an amount you are happy with? Were you hoping for more? Were you hoping to buy a bigger property?

If you are not happy with the maximum home loan amount or you think it is too small, you can:

1. increase your repayment amount (if you know you will be able to do this in real life). Remember when I asked you where you might be willing to save money—you might want to revisit this section to see where else you could save—you see, there was a purpose for doing that!
2. increase the number of years you would like to pay it off for. You can even increase it by half a year (e.g., 5.5 or 7.5 years) or a full year; it’s up to you.

In any case, if you do want to increase your maximum home loan amount, you can do that. Just be mindful that if you do increase the number of years you will pay it off in, it will take you longer to pay your home loan off, and you will be paying more interest along the way (so keep an eye on that total interest paid on the calculator and keep an eye on the Principal-to-Interest split).

Go on, what are you waiting for—use the ‘Reverse Home Loan Calculator’—give it a go on payitinfive.com and then come back to write down your maximum home loan amount.

Now, you might be wondering, what if I already have a home loan? That’s exactly what we’ll be talking about in the next blog post: What if I already have a home loan?