Buying a property is often one of the most significant projects in life. However, before visiting houses or apartments, it’s crucial to prepare your project by evaluating your borrowing capacity. This often-overlooked step can save you time, avoid disappointments, and help you successfully complete your purchase under the best conditions.
1. What is Borrowing Capacity?
Borrowing capacity is the maximum amount a bank is willing to lend you to finance your real estate project. It depends on several factors, including:
- Your income (salaries, bonuses, etc.)
- Your fixed expenses (rent, existing loans, etc.)
- Your personal savings
- The loan duration
- Current interest rates
Banks generally ensure that your debt-to-income ratio does not exceed 35% of your monthly income.
2. Why is it Important to Know It in Advance?
- Save Time in Your Search: Knowing your exact budget allows you to focus directly on properties within your reach, avoiding wasted time on unaffordable options.
- Avoid Disappointments: There’s nothing more frustrating than falling in love with a home only to discover it’s out of budget.
- Enhance Credibility with Sellers: Buyers who know their borrowing capacity and have a loan simulation are perceived as serious and reliable, which can make a difference during negotiations.
- Prepare a Strong Financial File: Having a clear idea of your budget enables you to start building a coherent financing plan, speeding up the purchasing process.
3. How to Calculate Your Borrowing Capacity
To estimate your borrowing capacity, you have several options:
- Use an Online Calculator: Quick and free, it provides an estimate based on your income and expenses.
- Consult a Mortgage Broker: These professionals can analyze your financial situation and guide you to the best loan offers.
- Meet with Your Bank: Your financial advisor can give you a personalized estimate based on your banking history.
4. Anticipate Additional Costs
It’s also essential to plan for additional costs associated with buying property:
- Notary fees (around 7–8% of the property price for older homes)
- Agency fees
- Potential renovation or repair costs
- Mandatory insurance
These costs should be included in your overall budget to avoid unpleasant surprises.
5. A Key Step for a Stress-Free Purchase
Knowing your borrowing capacity is an essential step to approach your real estate project with confidence. It helps you stay realistic while maximizing your chances of finding the perfect property.
As a real estate agent, I’m here to guide you through every step of your project, from budget evaluation to signing the final deed. Together, let’s turn your real estate dream into reality!