The first step when planning to buy a house is to calculate with a credit simulator its repayment capacity. Although it may differ significantly depending on the bank chosen, some rules remain unchanged.

What is the debt ratio?

It is generally estimated that a person can borrow up to 1/3 of his/her income. The rate of 33 % is not a fixed rule and varies according to the profile of the borrower. Before granting a loan, the bank calculates the total amount of outstanding loans: real estate, personal loans, etc. If the total amount of repayments represents less than 33 %, the file can be studied by the banking establishment. Beyond this percentage, the client is considered "at risk".

This 33 % rule is sometimes circumvented by banks. This is the case for customers with a high family income. If the amount remaining to the household after repayment of the instalments is deemed sufficient, the bank may allow a higher debt ratio. On the other hand, borrowers with modest incomes may be refused a loan even if their debt ratio is below 33 %.

The calculation of the debt ratio is based on the formula: (borrowing costs) X 100 / (net income)
Income includes: net salaries (excluding commissions and bonuses), alimony, profits from self-employment, pensions...

How to define your repayment capacity?

Before contacting a banker, it may be worthwhile to use a credit simulator to define your repayment capacity. Based on an average of 33 %, the formula for calculating your repayment capacity is as follows
(net income X 33 %)- borrowing costs

For example, for a couple earning €4,500 per month and who have already taken out loans for €1,000, the repayment capacity would be : (4,500 X33%) - 1,000 = €485

Use a credit simulator to calculate your borrowing capacity

The borrowing capacity depends on the loan rate as well as the repayment capacity.
For example, if your repayment capacity is €1,000 per month and your interest rate is 3 %, you could borrow €103,500 over a 10-year period or €180,000 over a 20-year period.

The easiest way to calculate your borrowing capacity is to use a credit simulator. You can use this database to compare the offers of the various banks where you are considering taking out a mortgage.