As interest rates rise, homebuyers are discovering that they can’t afford as much home as they could have just a few years ago. The 30-year mortgage rate recently stood at about 4.6%, according to a BankRatesurvey of national lenders, the highest rates have been since 2014.

Should mortgage rates continue higher, buyers may have to save more for a larger down payment or simply buy less expensive homes, as each marginal increase in rates has a big impact on how much you can borrow.

Cardboard house sitting on $100 bills

Image source: Getty Images.

The math behind mortgages

Typically, people use a mortgage amount and interest rate to calculate a payment. Instead, we’ll be working backwards, using a mortgage payment and interest rate to determine how much you can afford to borrow.

But first, we need to set a baseline. I’ll use $200,000 as the mortgage amount in this example, since it approximates about how much you’d need to borrow to buy the median home in the United States. With a 30-year mortgage at 4.6%, borrowing $200,000 would set you back about $1,025 per month in principal and interest payments. That’s simple enough.

But what if interest rates rise 0.50% or fall 0.25%? How much could you afford to borrow then, assuming you wanted to keep the same $1,025 monthly payment? The chart below shows how changes in the interest rate affect how much you can borrow.

Chart showing how changes in mortgage rates affect borrowing amount.

Chart by author.

Each bar in the chart represents a quarter-point change in 30-year mortgage rates. A drop in rates (move left) would increase the amount you could borrow, whereas an increase in rates (move right) would reduce the amount you can afford…