Real estate credit: how to know how much I can borrow

Apart from your debt capacity, other criteria will make it possible to determine the borrowable amount:

Mortgage

Real estate credit is a type of loan granted by a financial institution, generally a bank, to finance the purchase of real estate. This may include the purchase of a house, an apartment, land or a commercial building.

Real estate loans, how it works ?

The mortgage is generally reimbursed over a period of several years, with monthly payments which include the capital borrowed as well as the interest. The interest rate on a mortgage can be fixed or variable, depending on the terms of the agreement between the lender and the borrower.

Did you know ?

To obtain a mortgage, the borrower must generally provide detailed information on his financial situation, in particular his income, expenses and credit history. The lender will then evaluate the borrower’s capacity to reimburse the loan and set the loan conditions accordingly.

Real estate credit: how to know how much I can borrow ?

Knowing your borrowing capacity is essential when you embark on a real estate project. The amount borrowing from the bank lets you know what type of properly projecting and thus developing your project. But how to calculate your borrowing capacity ?

How to calculate your borrowing capacity ?

The borrowing capacity is defined by the maximum sum that you can borrow from a banking establishment over a given period. As its name suggests, the borrowing capacity refers to the borrower’s ability to repay the amount loaned by the bank. This capacity is determined by several criteria, starting with the income of the borrower and the possible co-borrower.

In France, a bank cannot grant you a mortgage whose repayment monthly payments exceed 33 % of your available income. This is the famous debt rate. This debt rate corresponds to the relationship between monthly payments linked to all of your loans and monthly income. For example, if you have a net income of € 2,000 per month, your credit repayment monthly payments will not exceed € 660 (2,000 x 33/100).

Debt rate

The 33 % debt rate rule allows the bank to ensure that you will be able to reimburse your monthly payments, but it also aims to protect borrowers. This rule indeed guarantees a remaining to live reasonable each month to meet other expenses. For example, with a net income of € 2,000 per month, the maximum debt rate rule to 33 % makes it possible to limit monthly payments to € 660. This allows you to keep a remainder to be lived by € 1,340 to cover other expenses.

The 33 % rule is not completely frozen, however. Indeed, people with high income can be offered monthly payments above 33 % of their income, because their remains to live is important. Conversely, people with modest income will often be offered monthly payments of their third -party income, to guarantee them a reasonable stay.

The other criteria for knowing your borrowing capacity

Apart from your debt capacity, other criteria will make it possible to determine the borrowable amount:

• The type of loan. It can be a fixed rate or revisable rate loan.
• The duration of the loan. The most common borrowing periods are 15, 20 and 25 years old, but can also be shorter, of the order of 7, 10 or 12 years. The shorter the duration, the lower the interest rate and therefore interesting for the borrower.
• Personal contribution. This is the amount of money you are able to pay with your own savings to finance part of the property. A consequent contribution makes it possible to reduce the borrowed amount and therefore the duration of the loan, which itself influences the interest rate.
• Your possible eligibility for a helped loan such as the zero rate loan (PTZ).
• Your age and state of health at the time of subscription.

Answer these questions allows Know your borrowing capacity More precisely. You can also use a mortgage simulator to calculate your loan capacity.

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