Conversely, the smaller it is, the less you can borrow or over longer durations (and therefore it will cost more). The key is to find the right balance based on your wages and other income and expenses for the next few years. To help you do this, here are the tips for choosing your monthly loan payment. Debt ratio In addition, you will not be able to choose a monthly amount that is too high because the bank will check that it is reasonable for your budget in order to limit the risks on the reimbursement. The bank will calculate your debt ratio.
All the Supports for You Here
This is the share that all your loans represent (home loan but also personal loan, consumer credit, car loan, etc.) in relation to your regular income. We often hear about the 33% rule as a limit debt ratio. It has no legal obligation. The banks mainly look at your remainder after paying your loan and your fixed costs. For those with low wages, the limit at 33% may already be too high. You can click here for expert advice on home loans here and that is reason you can find the deals essential here.
- On the contrary, for those who benefit from very high wages (or from a very large heritage), it is possible to exceed this threshold to reach up to 40%, especially to finance a rental investment. Personal contribution To finance your property acquisition, it is possible to use part of your savings. We talk about this money as your “personal contribution”. This is any money you bring to your project that they don’t have to finance with a loan.
- Today, it is quite possible to obtain a mortgage without contribution , even if it is a little less easy in 2020 than in 2019. Its more or less important use is an interesting lever for a negotiation of credit with a bank. This reassures her in the sense that: It shows your ability to save. You will then be a potential “good client” for all of the bank’s investment products.
The Management Options
You also know how to manage your budget to save regularly. This transfers part of the risk to you because the amount borrowed will be lower than the value of your house or apartment This makes it possible to reduce your debt ratio and thus obtain credit more easily It’s up to you to calculate, with regard to the rates and the possibility of earning your savings, how much to spend on your investment.
Borrower insurance In here, all banks ask, when taking out a mortgage, to take out loan insurance, at least to cover the risks of death and incapacity for work. It is also possible to take out insurance against job loss, but this is very little retained (around 3.6% of loans).