How Much House Does Your Payment Buy? (And What a 1% Rate Change Really Does)
Most buyers start with the wrong question. They ask, "What's the rate?" The better question is, "What monthly payment am I comfortable with, and how much house does that payment buy?"
That's what a buying power calculator answers. You pick a payment. The calculator shows how much loan, and how much house, that payment supports at different interest rates.
The answer usually surprises people. Small rate moves change your price range more than you'd think.
What is buying power?
Buying power is the loan amount, and the home price, a monthly payment can support at a given interest rate. When rates go down, the same payment carries a bigger loan. When rates go up, the same payment carries a smaller one.
Your budget didn't change. Your buying power did.
How much does a 1% rate change affect what I can buy?
On a $720,000 loan, a 1% drop in rate lets the same monthly payment carry about $83,000 more. A 1% increase does the opposite: the same payment carries about $70,000 less.
That's a 30-year fixed loan with rates in the 6% range. Put $180,000 down and your price range moves from $900,000 to roughly $983,000 if rates drop a point, or down to about $830,000 if they rise a point.
Same buyer. Same budget. A $150,000 swing in price range.
How much is 0.125% worth?
About $9,600 of loan amount on that same example. Rates usually move in eighths, so this is the number worth knowing.
This is why a buyer who waits a month for rates to "get a little better" might gain $10,000 of buying power, while prices in a competitive neighborhood can move faster than that.
How do I read the payment matrix?
The calculator builds a grid. Rates run across the top. Loan amounts run down the side.
Read down the dark diagonal. Every box on that diagonal is the same monthly payment. It shows the loan amount you can carry at each rate without your payment changing.
Read across the starred row. That's your current loan amount. It shows how your payment moves if rates change and the loan stays the same.
The home price column adds your down payment back in, so you can see the price range at each rate.
Should I wait for rates to drop before buying?
Maybe, but run the numbers first. Waiting has three costs that buyers don't always count:
Rent. Every month you wait is a month of rent you won't get back.
Price changes. If home values in your area rise while you wait, they can eat the buying power you gained.
Competition. When rates drop, more buyers come back at the same time.
If you're stuck on this one, use my Cost of Waiting Calculator to compare buying now with buying later.
What does the calculator not include?
The buying power calculator shows principal and interest only. Your full payment also includes property taxes, homeowners insurance, HOA dues if you have them, and mortgage insurance if you put less than 20% down.
In most of California, taxes alone run around 1.1% to 1.25% of the purchase price per year. Budget for them, or you'll overestimate how much house you can buy.
How do I use this with a real estate agent?
Bring the matrix to your agent before you start touring. It answers the question every agent wants answered early: "What price range should we search, and what happens to that range if rates move?"
Agents, this is a good one to send a buyer who's sitting on the fence. It turns "rates are too high" into a real number.
Try it with your numbers
Open the free Buying Power Calculator. It's free, there's no sign-up, and it works on your phone.
Want me to run it with real rates and a real pre-approval? My team can fully underwrite you before you even pick a house, so your offer looks like cash to a seller.
Frequently asked questions
What is a buying power calculator? It shows how much loan and home price a fixed monthly payment can support at different interest rates.
How much more house can I buy if rates drop 1%? On a $720,000 loan in the 6% range, about $83,000 more for the same payment. The exact number depends on your loan size and rate.
Does buying power include taxes and insurance? No. This calculator covers principal and interest. Add taxes, insurance, HOA and mortgage insurance for your full payment.
Should I buy now or wait for lower rates? Compare the buying power you'd gain with the rent you'd pay and any price increases while you wait. A cost of waiting calculator does this side by side.
Mike Belfor is a Branch Manager and Loan Originator with American Pacific Mortgage (NMLS 1850), with about 24 years in mortgage lending. MLO NMLS 264700, DRE 01878769.
Buying Power Calculator: How Much House Does Your Payment Buy?
See how much loan and home price your monthly payment supports Free buying power calculator, no sign-up.
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