2023-10-01 06:09:01
Guide-epargne.be Do you want to take out a mortgage loan, but are you wondering how much you can borrow from the bank? What factors play a role in this, what safety margin should you provide and what conditions should you meet? Below, Guide-epargne.be summed it all up for you.
Suppose you apply for a home loan. In this case, your bank will want to get a complete overview of your financial situation.
First of all: what are your income? Not only your monthly net salary, but also all of your income including your vacation pay, your end-of-year bonus and other income (with the exception of family allowances). The bank will also analyze your charges: how stable is your socio-economic situation? How is your household composed, do you have a stable job…? You will need to answer all relevant questions asked by the bank for this purpose.
Next, the bank will review your credit history. For this purpose, this financial institution will consult not only its own files, but also the Central Personal Credits of the National Bank of Belgium. This way, the bank will obtain a very precise overview of all your loans.
To determine the amount you can borrow, the bank will take into account the value of the home you want to buy, the amount you can pay out of your own pocket, the ratio between the amount you want to borrow and the value of the home as well as your income. Below we will explain how this will all work.
Looking for a mortgage loan? Here’s what you absolutely need to know.
What is the maximum amount you can borrow?
In recent years, you can only borrow 90% of the value of the home you plan to buy. You must therefore have 10% of the purchase price and the registration fees yourself. However, there are several exceptions to this general rule.
• For example, for young people who are buying a home for the very first time. For 35% of these loans, the bank can finance more than 90% of the value and for 5% of these loans, even more than 100%.
• Do you want to buy a second home? For 20% of these credits, the bank can provide 90-100% of the purchase amount.
• Are you buying a home with a view to renting it out? In this case, your own contribution must amount to 20%, but 10% is sufficient for 10% of the credits granted.
How much do you benefit from borrowing?
How much will you be able to manage financially? How much can your monthly repayments be? In general, it is better not to devote more than 30% of your income to repaying your mortgage. This way, you will keep enough reserves.
To those who are currently renting and considering purchasing real estate, Test Achats recommends the following: regarding your monthly payments, do not exceed 80% of your monthly rent + the average monthly amount that you can currently save.
Pipe: Is it better to buy or rent a house?
But the higher your income, the more flexible the bank will be regarding the ratio between your debt repayment and the percentage of your income. In this case, the impact of your fixed costs for electricity, water and telecoms (for example) will be less considerable.
The shorter the duration, the more favorable the rate will be
According to the Notaire.be Real Estate Barometer, a house in Belgium costs 320,937 euros on average. Let’s assume that you can borrow a maximum of 90% of this amount (i.e. 288,843.3 euros) and that you repay this amount over a period of 20 years at the rate of 3.7%, currently the average fixed interest rate over a period 20 years old. In this case, you will have to repay 1,695.78 euros on a monthly basis, which will correspond to the total amount of 406,987.52 euros (including 118,153.22 euros of interest).
The average 30-year fixed interest rate is 4.34%. If you borrow at this rate, you will have to pay 1,421.90 euros on a monthly basis, or 511,885.54 euros in total (including 223,051.24 euros in interest).
The overall cost of your credit will therefore be high if you spread your repayments over a longer period.
Read more: A 30-year mortgage loan: justified or not?
How does your bank protect itself against possible payment problems?
If you take out a mortgage, the bank can take out a mortgage on your home. But you can also give a mortgage mandate, according to which the bank will have the right to take out a mortgage in case you fail to meet your financial obligations. Or other people can promise to repay your loan for you in case you can no longer do so. Is the value of your property not enough as security for the proposed loan? In this case, the bank may request additional guarantee.
The bank will also ask you to take out 2 insurance policies:
• Home insurance (or fire insurance) will not only allow you to repair your home following a disaster, but also to insure it against the bank.
• Regarding outstanding balance insurance, the bank may partially or entirely recover the remaining amount of the loan in the event that you die before having fully repaid your mortgage loan. Read here what you absolutely need to know about outstanding balance insurance.
Please note: it may be that the bank grants you the most favorable interest rate, but that your overall costs at the end of the term are higher due to more expensive home insurance or outstanding balance insurance! It is therefore always in your best interest to take all aspects into account. Using the tool below, Guide-epargne.be will be pleased to assist you in this context.
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Read more on Guide-epargne.be:
How to recognize dishonest credit providers?
Where can I find the best loan to finance my energy saving investments?
What is the impact of higher mortgage rates on bank lending volumes?
This article is brought to you by our partner Guide-epargne.be. Guide-epargne.be is an independent comparator of banking products and seeks competitive prices as well as better rates.
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