Home Loan: The ability to borrow
Before you start contacting an agency to start the property search process, you must determine your ability to borrow. This is already an important component of obtaining a mortgage, allowing in particular to determine the amount that you can borrow to realize your project. . also allowed Set your monthly loan payment You can contract.
In principle, the monthly repayment capacity is determined on the basis of a debt ratio of 35%. Note that not all banks consider the same elements to determine a customer’s borrowing capacity. In fact, the ability to borrow can vary according to the interpretation of the remainder for living, rent and financial income by a banking institution. This is why simulating the ability to borrow online is a good alternative. In fact, the appreciation you will receive will vary based only on the term of the mortgage.
To calculate the borrowing capacity, the equation is as follows:
Borrowing capacity = [(Vos revenus – vos charges mensuelles) x 35] / 100
Note that it is possible to improve your ability to borrow. In fact, it can increase thanks to a Consolidation of credits. If you have credits in progress, you can combine them to improve your financial situation with one new credit, with a longer repayment period.
Monthly mortgage payments
Of course, it is also important to calculate the monthly payments. In fact, a mortgage necessarily has a cost, which leads to an interest rate. The idea is to reduce the real estate rate as much as possible.
To get the mortgage interest rate, it is necessary to take into account 3 elements, namely:
- Mortgage creation costs,
- financial market prices,
- bank margin.
Note that a low mortgage rate does not mean that you will have a better mortgage. In fact, the price of the mortgage will also be affected by its duration. owns Lower monthly payments Over the long repayment period, it will allow you to better manage your monthly budget. However, this scheme will definitely cost you more in total. So you should find the right balance, i.e. a potential monthly payment, but over a shorter payment period.
It is possible to use an online simulator and comparison to more accurately determine the monthly payments involved in a particular offer.
Expected Notary Fee
You should also try to estimate the notary fees involved in purchasing your property. As a reminder, they correspond to the amounts you will pay to the notary. Whether you plan to buy new or not, you should always pay the notary fee because the deed of sale of real estate is a notarized deed. This means that the editor’s signature must be made in front of a notary public.
As part of the sale of real estate, the notary’s fee consists of:
- duties and taxes,
- additional expenses and costs,
- fees or rewards.
As you understand, only part of the notary’s fee goes to this professional. In general, only 10-15% of costs will go to him. The remainder consists of taxes for the benefit of the state and local authorities.
as a principle, It is the borrower’s personal contribution that will be used to pay various additional costs, including notary fees. However, if you don’t have one, you can request financing that covers the cost of these various costs involved in signing the deed of sale.
To estimate the notary’s fee, note that it varies according to the price of the property and whether it is new or old. In fact, the new home will save you money as the notary fee to be paid is reduced compared to those involved in buying a home in the old one.
For new properties, notary fees are generally different Between 2% and 4% of the purchase price. On the other hand, in the old one, it will range from 7% to 8%.
You can use the online calculator to estimate the notary’s fee and thus better prepare your budget. It’s also the data that allows you to compare different proposals made by your real estate agent.
Mortgage Credit: Debt Ratio
The debt ratio indicates the maximum amount that the borrower must devote to repay the loan. This is the amount that must not be exceeded if he wants to continue to live properly.
This is an important indicator for banks, especially in Credit application study. Practically speaking, by conducting a feasibility study for a loan to buy a house, the financing institution will determine this rate according to the established criteria and the situation of the borrower.
This is an important point in the context of a home loan that involves a very long repayment period, stretching over many years. You have to make sure that you can live normally despite your mortgages and above all make your monthly payments without difficulty.
To get the debt ratio, the equation is as follows:
Debt Ratio = Amount of Credits and Fixed Charges x 100/Income
To take a concrete example, imagine that the monthly loan payment amount is 500 euros for a family with a monthly income of 2500 euros. The debt ratio is calculated as follows: 500 x 100/2500 = 20%. This borrower has a debt ratio of 20% and it is very likely that he will not have a problem with repaying his loan.
Note that there is no law setting the maximum debt ratio. On the other hand, the Supreme Council for Financial Stability develops recommendations on this subject, and reviews them periodically. According to the latest recommendations, Maximum debt ratio set at 35% of income from the borrower. After this 35%, the borrower is very likely to face difficulties in meeting the loan maturities and maintaining a comfortable lifestyle.