Today, investing in stone is an attractive investment, which attracts many French people who are keen to make full use of credit leverage. But many of them tend to underestimate their borrowing capacity. Here, the role of a broker, expert in real estate credit, is to enlighten and support the future buyer in his real estate purchase project while facilitating the acceptance of his credit.
What is mortgage borrowing capacity?
Borrowing capacity refers to the maximum amount that a borrower can expect from a bank. It depends on several criteria – and in particular on the financial solvency of the borrower. Solvency defined by a set of elements allowing the lending organization to assess the risk represented by the borrower.
Note that the broker knows its elements, as well as the conditions of each banking establishment with which it signed an agreement: it can therefore completely replace the bank to assess without error your borrowing capacity in function (in particular) of its debt ratio.
The indicative basis for the debt ratio
Traditionally, banks have relied on a debt ratio of 30%, although it can vary from 25 to 35% depending on the personal situation of the borrower. For example, with an income of $ 3,000, the monthly repayment cannot exceed $ 900; depending on the case, it may be more precisely between 750 $ to 1050 $. A first indication allowing to carry out the first loan simulations on the Internet and thus know its borrowing capacity.
An essential datum, strongly conditioning the quest for his property: it would be a shame to miss an opportunity, because you think you don’t have the budget to buy it, right? Therefore, it is better to rely on the informed opinion of a mortgage broker.
Criteria influencing borrowing capacity
Beyond the strict income of the purchaser, the borrowing capacity evolves according to the three key criteria: the personal contribution, the duration of the loan and the interest rate applied.
Criterion 1: Personal contribution
Quite logically, personal contribution influences borrowing capacity, insofar as, mathematically, it decreases the amount of the loan. Note that in general, lending institutions require a contribution – at least, up to notary and agency fees.
Criterion 2: The duration of the loan
The borrowing capacity also depends on the duration of the loan envisaged: the longer the repayment period, the greater the total cost of the credit.
Criterion 3: The interest rate
Associated with the duration of borrowing, the rate also influences borrowing capacity, even if this percentage weighs less than the Annual Effective Insurance Rate (TAEA). Note that insurance can be taken out by delegation, in the first year of the loan (Hamon law), or on each anniversary date (beyond the first year of the loan).
The credit broker put himself at the service of the borrower?
Asked from the start of the real estate search, a broker can refine your project as you go along to “stick” as closely as possible to a request that is built up over the visits. Indeed, if the borrowing capacity is a fact to know at the outset, it can be enhanced by a few thousand additional euros depending on the property chosen …
A specialist who can analyze your personal situation
From the first meeting, the expert analyzes the personal situation of the candidate, to calculate the borrowing capacity: for this, he asks him for the various supporting documents which will be – in any case – necessary for his search for financing. Based on these documents, the broker can already quickly establish a first purchase range, on which the future borrower can build his real estate project.
A credit broker who is both responsive and available
Depending on the progress of your real estate search, the credit broker can refine and/or modify his analysis, by integrating other elements, likely to influence the borrowing capacity: is the research is done on an old property or new? In fact, can it open up to devices such as the zero-rate loan? Etc. So many criteria that determine borrowing capacity.
For example, you are a first-time buyer, with resources of less than $ 30,000 and you want to buy new housing in Nantes for $ 135,000, you could get up to $ 54,000 spread over 20 years. In other words, and on the basis of an initial contribution of 10%, or $ 3,000, you would only have to build a loan with interest on the basis of $ 78,000 (and not the initial $ 135,000).
Another example, in the case of a bridging loan, a broker knows well that a bank will tend to consider that 70% of the value of the first property, as a personal contribution, in order to prevent any risk linked to this resale. Naturally, this approach influences the borrowing capacity for the second purchase.
But perfectly supervised, this solution can also prove to be interesting: a second-time buyer can thus decide to buy and then sell, in order to avoid the transit rental and the costs of two moves. A traditionally stressful operation, but likely to generate great savings …