This is the crucial question that many borrowers ask themselves. Indeed, the borrowing capacity determines the type of real estate that it is possible to acquire. Thus, before applying for a mortgage, it is important to take stock of your income and expenses to find out if the loan does not risk unbalancing the family budget.
The borrowing capacity corresponds to the amount that it is possible to request from a banking institution with a view to acquiring real estate without causing financial problems. It is a key element of the purchasing capacity which is equivalent to the amount that the borrower can invest in the project. This purchasing capacity results from the combination of borrowing capacity, personal contribution, allowances and aid of all kinds as well as any subsidized loans to which the borrower is eligible. There are mainly two elements on which the borrowing capacity is based, namely the debt ratio and the remainder to live.
To know the borrowing capacity, it is first imperative to take stock of the debt ratio which is determined by making the relationship between expenses and income. Among the income taken into account by the banks are wages and salaries, profits whether agricultural, commercial or industrial, retirement pensions, property income, investments as well as regular financing. The charges represent the rents, the monthly payments of credits in progress as well as the alimony to be paid. When calculating the debt ratio from this data, the percentage of income must not exceed 33% of recurring expenses.
However, not all profiles are in the same boat. If some see their credit application refused with a debt ratio of 30%, others may receive the agreement of the bank even if their rate is 40%. This notion of debt capacity is inseparable from the remainder to live which is equivalent to the amount available to the household after the payment of all its expenses. For a single person, it is ideally 600 to 1000 euros. And for a couple without children, the rest to live should be 750 to 1000 euros with an increase of 400 euros per additional child.
To get a better idea of its borrowing capacity, nothing better than to perform a small simulation. Take the example of a couple wishing to borrow 100,000 euros for a period of 10 years. If he earns 2499 euros per month, he can afford to pay a monthly payment of 833 euros. And if he receives 6,249 euros and wants to borrow 250,000 euros still over 10 years, their monthly payment can reach 2,083 euros. For a 20-year loan, a borrower earning 3,750 euros and wanting to borrow 300,000 euros will have to pay 1,250 euros each month for his credit.
People who want to increase their borrowing capacity to be able to obtain a higher amount from the bank can consider buying back credit. This operation consists of bringing together in a single loan all outstanding loans and even personal or tax debts. It has the advantage of considerably reducing the amount of monthly payments in order to increase borrowing capacity. It is admitted that the reduction can reach 60% in certain cases. What to offer the possibility of concretizing a new project without avoiding falling into a situation of over-indebtedness. The impact of the repurchase of credit is even greater when the old loans taken out have been accompanied by very high interest rates.
