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How to calculate borrowing capacity? Borrowing capacity is the maximum amount you can borrow over a given period based on your financial income and expenses.
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In other words, it is the ability of a borrower to face the deadlines of a mortgage. Before embarking on the purchase of a new property, it is essential to take stock of your financing needs and, in particular, your borrowing capacity.
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This will allow you to consider your future loan application serenely, with all the cards in hand.
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Knowing your borrowing capacity, you can both determine the maximum amount you can repay and the shortest repayment term.
Your borrowing capacity is determined based on:
- your debt capacity: in USA, the debt threshold is 33% of your income;
- the amount of your personal contribution;
- the type of loan desired (fixed rate or revisable rate in particular);
- the amount of the monthly payments you wish to repay;
- the duration of your mortgage loan;
- your age when you buy a home loan.
How much can I borrow for a home loan?
To find out how much you can borrow for a home loan, you need to be able to answer the following questions:
- How much is your personal contribution?
- Do you plan to buy an old or new property?
- Do you qualify for a PTZ-assisted loan?
- Would you like to buy to make a rental investment?
- At what rate can you borrow?
All the answers to these questions, combined with the use of a mortgage simulator, will allow you to know the amount to borrow for your credit.
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Our calculators allow you to make a simulation at the best rate, to inform you about the average rate practicing in your area and thus get a personalized simulation of your mortgage.
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You will be able to follow the various simulations carried out with our calculators to call on one of our mortgage brokers who will bring you all the necessary advice as to the choice of financing solution, best suited to your borrower profile as well as to the nature of your real estate project.
How to use the calculator to know my borrowing capacity?
Our calculator, totally free, allows you to determine the borrowing capacity according to your income and your expenses.
The calculation adapts that one borrows alone or with two.
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To understand what are the variables in our calculator of borrowing capacity:
Revenues correspond to: your salary and professional bonuses; other sources of income: give preference to fixed sources of income (eg property income); the amount of the personal contribution.
Expenditures include: rent, potential consumer loans and other mortgages, etc. Try to take into account all your fixed charges.
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The borrowing capacity can be supplemented with a zero interest loan (PTZ) under certain conditions. The mortgage broker can tell you about your rights and how you can benefit from them.
After validation of the form, three amounts will be calculated:
- the monthly payment, where it will be possible to choose the rate to apply;
- the amount of the mortgage loan;
- the total cost of credit.
Please note: the information and results of the calculation of your borrowing capacity for your mortgage are given as an indication and can not in any case constitute a document of a contractual nature. All financial elements will have to be analyzed by our mortgage brokers to support this simulation.
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It is wise to call a broker before starting any approach with banks.
In fact, mortgage brokers benefit on average from around a hundred partnerships with various banking institutions, enabling them to:
To offer you offers at the most interesting rates: in exchange for a large volume guarantee, they negotiate very low credit rates directly with the financial departments, which gives them access to rates that can not be offered by the advisers.
To give you objective advice on the best offer to choose: by helping you to calculate your borrowing capacity, by studying all the offers of the moment of their partners, they can find the one most adapted to your profile.
How to know my debt ratio?
The debt ratio is your ability to repay a credit, based on your monthly income. It is generally accepted that the debt ratio should not exceed 1/3 of the annual net income (the bar of the famous 33%).
Beyond this, the risk of default is considered too important by the banks.
The debt ratio is calculated by taking into account your fixed income: net wages; contractual premiums: for example a 13th month; alimony, pensions and disability pensions; non-salaried professional income: for the liberal professions, farmers, traders, etc.
Depending on the lending institution, other sources of income may be included in the calculation of this rate: family allowances, commissions, housing allowances, property income, etc. The consideration of these amounts is at the discretion of the bank where the credit will be contracted.
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If you have very comfortable incomes, the debt ratio can exceed the threshold of 33%, and even reach 35-40%. On the other hand, if your income is modest, your debt capacity may not exceed 30%. So there is no absolute rule.