How Much Can You Borrow For Your Real Estate Purchase?

Before granting you a mortgage loan, the lender will want and must ensure that you are able to repay the amounts loaned. It will also take into account several elements such as the amount of your monthly income, the value of the property you buy or the type of credit you wish to take out.


Set Yourself A Limit

Do not hesitate to use the Wikifin budget calculator to find out how much you are able to repay each month.

It is customary that the monthly payments of your mortgage loan do not exceed 1/3 of your income.

Example: If you earn 3000 euros net per month, your reimbursement limit will therefore be approximately 1000 euros per month

This is of course a principle that must be modulated according to the importance of your income, your family responsibilities, the guarantee offered, etc. From these 1000 euros you must withdraw the monthly payments that you must pay for the repayment of other credits.



The Lender's Criteria

Your income is one of the elements that will determine the amount that the lender will be inclined to lend you. But the latter will also be based on other criteria:

The estimated value , after expertise, of the property you want to buy, build or renovate.
The part of the purchase that you can finance yourself .
The guarantees that you can bring to your file.

Example: You have found the house of your dreams.

 The seller wants to sell it for 250,000 euros

After analyzing your file – but before an appraisal – the lender decides to grant you a mortgage loan covering 80% of the value of the house, i.e. 80% of 250,000 euros = 200,000 euros. You must therefore collect the missing 50,000 euros, to be increased by the amount of the costs related to the purchase of the property . Do you have this amount and the amounts needed to cover the costs associated with the purchase of your home? You are then very close to the goal.

Problem : according to the expert it will be difficult to get more than 200,000 euros from the house. If the lender agrees to follow you in your purchase up to 80% of the estimated value of your property, your mortgage loan will then only cover 160,000 euros. You are therefore still short of 40,000 euros.

So you ask your parents for help. They agree to pledge cash vouchers to your bank, for a value of 40,000 euros. With this guarantee , the bank agrees to grant you a loan of 200,000 euros. And you are able to buy the house you want.