To search for a property for purchase, it is necessary to know the overall budget available. You must therefore take into account your contribution, the notary fees and know how much you can borrow.
Knowing the amount of the loan that will be granted by the banks for your mortgage is therefore an essential step in carrying out your project. This amount is called “borrowing capacity”.
Calculate your borrowing capacity
Borrowing capacity is the maximum amount you can borrow based on your income and expenses. It corresponds to the monthly amount of the maturities that you will be able to face, multiplied by the number of months of mortgage.
Taking stock of your borrowing capacity is decisive and allows you to consider a purchase serenely by putting all the chances on your side so that your loan is granted by banking establishments.
Your borrowing capacity will therefore depend on many parameters, such as:
- Your debt capacity: it should not exceed 33% of your income, unless you have very high income
- Your personal contribution: it can come from your savings, a donation, an estate or even an assisted loan
- Your age and your loan term: the shorter the loan term, the less expensive the mortgage
- Your monthly loan payments: you can decide to repay to the maximum of your abilities or on the contrary opt for low monthly payments in order to have a larger remainder to live
You must therefore put your project on paper and ask yourself the right questions before determining your borrowing capacity.
The right questions to ask yourself to know how much you can borrow
It is important to take a look at your real estate project before knowing how much you can borrow:
- Borrow alone or in pairs: depending on whether you are single or in a relationship, whether you have a common life project or not, whether your income is similar or not, it is important to know who is borrowing and in what proportion
- The amount of the personal contribution: it is recommended to have a personal contribution covering at least the notarial costs, and preferably representing at least 10% of the total cost of the property
- Buying new or old: answering this question allows you to determine the notary fees, count 3% of the price of the property for the new and 8% for the old
- Assisted and subsidized loans: know if you are eligible for the zero rate loan or the employer loan for example, they are all assets to reduce the cost of your main mortgage and reduce your repayments
- How long do you want to borrow: depending on whether your project concerns a primary or secondary residence or a rental investment, depending on whether you are 20, 30, 40 or 50 years old, you will not borrow over the same period
- What are my income: it is advisable to list all your cash inflows having a regular nature, salaries and wages, non-salaried income, bonuses having a salary nature, pensions received, family allowances, income from property , etc.
- What are my charges: it is advisable to list all the charges which affect your debt capacity, these are mainly loans in progress, pensions paid and all other debts
Now that you have answered all these essential questions, you can calmly move on to the next step: simulating your project to find out the amount of mortgage you can claim without difficulty.
Simulate your mortgage to determine the amount you can borrow
Online calculators, comparators and simulators are very powerful today and allow you to accurately estimate the amount of your mortgage.
They take into account your personal and professional situation, your income and expenses, and put the largest banking establishments in competition to determine the borrowing rates to which you can claim.
The first step to take as part of your mortgage, the simulators allow you, free of charge and without obligation, to know how much you can borrow for your mortgage. They are a great help in your home search and should be used by all future borrowers.