Before making a decision as important as the purchase of a new home it is important to make calculations to know what our real position is and what type of home / mortgage we can access. This seems obvious is fundamental because if we do not do it we can fall short giving up better homes that are among our favorites.
To know this important fact you must focus on your borrowing capacity, without a doubt, the key factor in which banks will be fixed.
What is my mortgage funding limit?
As we discussed in the previous paragraph, the maximum amount that we can access and will be well seen by financial institutions, will be directly proportional to our borrowing capacity, that is, the percentage of stable income that we can dedicate to the payment of a debt.
Speaking of mortgage loans, most banks set their limits at percentages ranging between 30% and 35% of the income obtained monthly. This means that we should not allocate more than this percentage to the payment of the mortgage payment.
If we obtain a net income of € 1,500 per month and apply these percentages, our monthly fee must not exceed € 450 / € 500.
If, on the other hand, our level of individual or couple income is € 3,000, our fee may reach € 900 / € 1,000 per month.
The remaining 60% / 65% of our income the entity understands that we need them to cover other expenses such as bills, supplies, leisure and also savings.
Elements to take into account your mortgage calculation
We tend to fall into the error of thinking that the monthly payment is the most relevant expense of a mortgage and although it will be a recurring disbursement during the loan years, it is not the only factor to take into account.
Saving capacity
Banks usually grant a maximum of 80% of the appraised or sale value of the property in which you are interested. This means that in order to materialize the purchase, you must own the remaining 20% in your own funds, that is, you must have savings.
Associated expenses
In addition to the savings to face the purchase, there are another series of expenses that you will have to pay when you formalize the operation. The appraisal that is mandatory, notary fees, registration, additional taxes, etc. It is also important in this calculation to take into account approximately the maintenance costs of the house.
It will not be the same to compare a flat in a community than a single-family home.
Medium-term professional and personal situation
Although life always reserves unforeseen events for us and it is clear that there is nothing written, economic stability will not be the same if we are state officials, interns, employees or self-employed professionals.
On the other hand our personal situation can change considerably throughout the years of life of the mortgage. It may be that we start it individually and then form a family and another person is included in the financing or vice versa.
Other debts
What is your level of indebtedness at the time of applying for the mortgage?
For example, if you are finishing paying another loan, it may be a good idea to wait until you finish in order to request more financing. This will put you in a better economic position in the eyes of the bank.
Other income that you may have without being the salary will also be taken into account. A lease for a premises or property, widow’s pension, income for a financial product, etc.