Choose the right amount of your loan
May 24, 2019
Choosing the right amount to borrow during a real estate purchase is not easy, but this choice depends on the realization of a proposed purchase or construction. What are the pitfalls and mistakes to avoid? Which recommendations to follow? Point.
Determine the amount of your mortgage
When you want to invest in a real estate project, that you want to buy or build a new home, or acquire an old property, we necessarily want to put all the chances on his side to get the ideal property, according of its resources.
Thus, it is not uncommon, and it is even perfectly natural to want to have a budget comfortable enough to buy the housing of his dreams.
But this desire is sometimes to the detriment of reason, overestimating its borrowing capacity and by projecting on monthly payments too high.
Conversely, the fact of not wanting to take risks so as not to end up in a delicate financial situation may lead a borrower to underestimate its repayment capacity, and to miss a property that he is able to acquire, or end up with a spread credit, and therefore a high overall cost.
Hence the importance of choosing the right amount for your home loan .
Not too high, not too low. The right amount, corresponding to its financial capacity, while knowing that it is possible to adjust the monthly payments by extending the duration of the credit, even if this option increases the overall cost of the loan by adding interest.
Know your borrowing capacity
It is essential to know its borrowing capacity , ie the amount that one is able to borrow for its real estate project without jeopardizing its financial security.
The rule is that the debt ratio should not exceed 33% of the budget of the borrower
Beyond that, the risk of over-indebtedness is too important for a bank to validate a mortgage loan.
In this context, it is necessary to take into account its recurring income and some (income, alimony, family allowances, industrial profits, commercial and non-commercial …) and its expenses, also perennial (pensions, loans in progress, monthly payments … ).
The borrowing capacity is calculated as follows: expenses x 100 / income. The result must therefore be less than or equal to 33%
Even if the lending organizations also take into account the notion of “rest to live” in their decision making regarding the granting of a mortgage loan.
Thus, a household with comfortable resources can enjoy a margin of flexibility and exceed the threshold of 33% in some cases.
In all cases, the loan amount is capital in a real estate project. Thus, while it may seem tempting to extend the duration of the loan and the number of monthly payments to be reimbursed in order to have a larger budget, it should nevertheless be borne in mind that this choice will affect the overall cost of the loan. surgery.