While we often plan to buy, it’s important to be aware that the available budget may not match the one we’ve planned. Here, we’ll detail all the elements to consider to best prepare your borrowing capacity.
Understanding your borrowing capacity
To calculate the maximum monthly payment you can afford, banks rely on a simple rule: your debt ratio should not exceed 33% of your net monthly income . This means that the total sum of your monthly loan payments, including the future mortgage, should not exceed one-third of your net monthly salary.
Once this maximum monthly payment has been determined, it is possible to roughly calculate your borrowing capacity by multiplying your monthly net salary by 85. This method provides an order of magnitude, although it does not take into account specific factors such as interest rates or the duration of the loan .
Can we exceed this debt ratio?
In some situations, it is indeed possible to exceed the 33% debt-to-income ratio. If you have a large amount of remaining income or a very high income, some banks may accept a debt-to-income ratio of up to 35%, or even higher. In addition, banks have a certain margin of exemption on 20% of their credit files, often in favor of those with strong financial profiles.
How much can I borrow based on my salary?
Banks favor the stability of a permanent contract. Apply the 33% rule (one-third of your net salary) and multiply your net salary by 85 for a rough estimate.
If you’re on a fixed-term contract:
Fixed-term contracts are accepted, but stability is crucial. You’ll need to prove three years of experience in the same sector to reassure lenders. If you’re buying as a couple, one partner’s permanent contract makes the application easier.
If you’re a freelancer or self-employed worker:
Banks consider an average of your earnings over the past three years, which can reduce your borrowing capacity if your income fluctuates. As with employees, apply the 33% rule and multiply your net salary by 85 for an estimate, but the stability of your income is a key factor.
Have the conditions for granting a mortgage loan become more stringent in recent years?
In concrete terms, when someone buys a property for €330,000, in reality, with the irrecoverable additional costs, such as notary fees and guarantee costs, it will cost them €360,000
By lending him only €330,000 for the property, the bank is certain that the resale will cover the entire loan since it will have financed only physical, tangible assets, and not all the ancillary items which are a net loss. Inevitably, this additional security limits the borrowing capacity of buyers, and especially young first-time buyers who see their savings go towards rent, and who, because they are at the start of their careers, still have limited salaries.
stage of your project, from calculating your budget to handing over the keys. And to help you make your dream come true, we’ll top up your personal contribution with up to an additional 150,000 euros. Take our mortgage simulation and you’ll see, it can make all the difference 😉.
Borrowing together increases your borrowing capacity because your income is combined. However, banks also consider household expenses. The overall debt ratio also remains at 33%.
Banks also ensure that you have enough available after paying your monthly installments to cover your other essential expenses. This available balance can have an impact on the amount you can borrow, especially if one of the partners has a more unstable professional situation, such as a fixed-term contract or self-employment.
Personal contribution: an essential lever for borrowing more and better
Your personal contribution is a key asset for borrowing under the best possible conditions. This is the amount you invest directly into your purchase, generally at least 10% of the property’s price to cover notary and guarantee fees. The larger your contribution, the more reassuring you are to the bank, which can help you obtain a better interest rate and increase your borrowing capacity. A good contribution can also make a difference compared to other buyers in a competitive market!