To know how much he can get from the bank to finance the purchase of a home , an individual must know his ability to borrow .
Here are the keys to calculating this essential indicator.
Determine borrowing capacity
The borrower’s borrowing capacity corresponds to the amount that he can devote each month to the repayment of his loan, taking into account his income (wages, retirement pensions, property income, interest on financial investments, etc.). It may be necessary to add monthly payments related to other outstanding debts.
But the bank also considers the rest to live, which represents the sum available to the household once the current fixed expenses deducted: food, electricity, transport, telephone, taxes … If it is not enough to cover these incompressible charges, the loan is refused. The minimum is determined by the place of residence (because of the cost of living) and the composition of the home.
The amount spent on monthly payments can not exceed 33% of total income . However, banks accept a higher debt ratio for people with high incomes or a comfortable living to live, as well as young people with high potential …
To get a first idea of its ability to borrow, experts recommend performing simulations on online mortgage comparators brokers and banks.
Improve its borrowing capacity
The pooling of loans is a solution to lower its debt ratio . All debts are replaced by a single loan associated with a single monthly payment, the amount of which is reduced by the lengthening of the repayment term. Even if the transaction involves some costs, its interest is undeniable, especially if there are consumer credit at a high rate.
Others choose to buy two home loans in parallel, one being shorter (15 years and 20 years for example) and therefore, with a mortgage rate that reduces the amount of interest. The monthly payment decreases accordingly, increasing the rest to live.
Another option is tiered lending. The amount of the monthly payments is minimized during the first years of the mortgage , the time to find another offer at the best rate or time to settle the loan, before being revised upwards.