1. Your incomeThe initial factor in determining your maximum mortgage is your gross income. To be more specific: the ‘loan to income’. After all, in the end it all comes down to the balance between the loan and your gross income. If you have a permanent contract, we will include your salary, vacation pay and fixed thirteenth month or end-of-year allowance in your gross income. Show
If you don’t have a permanent contract or are self-employed, your gross income will be calculated differently. Other supplements such as regular overtime or a variable bonus may be included in the calculations. It’s important to discuss this in advance with your mortgage advisor. 2. The mortgage rateA low mortgage rate sounds great of course. In general, this is indeed positive – as long as you secure your interest rate for a minimum of 10 years. With a shorter term, the calculation may produce a lower maximum mortgage. For example: if you secure the interest rate for less than 10 years, your maximum mortgage is not calculated based on the actual interest but rather on a reference rate of 5% (this interest rate is redefined per quarter by the AFM). This is because your monthly expenses may drastically increase after the fixed-interest period. In this case, the bank’s risk level is higher. As the bank wants to be certain that you can continue to pay your expenses after the fixed-interest period, they estimate higher monthly expenses using the reference rate. View the current mortgage rates here 3. The value of your dream homeThe third factor in determining your maximum mortgage is the so-called ‘loan-to-value’. Simply put: the balance between the mortgage amount and the value of the property. In 2017, for example, you were able to borrow 101% of the property value. This was reduced to 100% in 2018 and this is set to continue in 2019. The value of your dream home is therefore a determining factor for the extent of your mortgage and for the amount of your own investment required to purchase the property. Are you planning on renovating the home or investing in sustainability? Look into the option of a construction loan and energy-efficient provisions. 4. Financial obligationsThis is strongly linked to the income factor. Next to your gross income, your (monthly) expenses are also evaluated. Your financial obligations significantly influence the portion of your income available for mortgage expenses. This includes:
These financial obligations are usually registered with the Dutch Credit Registration Agency (BKR). You can view your own credit registration for free. We advise checking your BKR information before applying for a mortgage. Note: not all financial obligations are registered with the BKR. It is important to inform your mortgage advisor of all of your expenses as you may face issues at a later stage if any financial obligations are withheld. 5. Housing expenseThe lesser-known, but not unimportant, factor in determining the level of your mortgage: the housing expense. The housing expense is the maximum percentage of your gross means-test income that you can spend on mortgage repayment (including interest). Your housing expense depends on:
So, how much mortgage can I receive?It’s clear that many factors play a role in calculating your maximum mortgage and that these factors are strongly linked. Our calculation tool gives you a good indication of how much you can borrow but for an exact calculation it is better to schedule an appointment with a mortgage advisor. Viisi is happy to help you work through the details during an obligation-free consult! Contact us for a free consult Download white paper ‘Buying a home in The Netherlands’Do you want to go on a home hunt well prepared? You will find all the information in this white paper. Before applying for a mortgage, you need to think about more than just whether you can afford the monthly repayments. Mortgage providers will look at your income and outgoings to see if you can keep up with repayments if interest rates rise or your circumstances change. How lenders assess what you can affordMortgage lenders base their decisions on what’s known as the loan-to-income ratio – the amount you want to borrow divided by how much you earn. The most you can borrow is usually capped at four-and-a-half times your annual income They must also assess the monthly payment you can afford, after looking at your outgoings as well as your income. This is called an affordability assessment. The lender must also look ahead and ‘stress test’ your ability to repay the mortgage. This is to make sure you’ll still afford repayments if the interest rate rises or there is a change to your lifestyle, such as:
If the lender thinks you won’t be able to afford your mortgage payments in these circumstances, they might limit how much you can borrow. Comparison websites are a good starting point for anyone trying to find a mortgage tailored to their needs. Some of the biggest mortgage comparison websites are:
Remember:
What the lender takes into accountWhen working out how much you can afford to borrow, the lender will look at: 1. Your incomeThis will include:
You will need to provide pay slips and bank statements as evidence of your income. If you’re self-employed you’ll need to provide:
You will normally have to provide two- or three-years’ worth of tax returns and business accounts. 2. Your outgoings This might include:
The lender might ask for estimates of your living costs such as spending on clothes, basic recreation and childcare. They might also ask to see some recent bank statements to back up the figures you supply. 3. Future changes that might make an impactThe lender will assess whether you’d be able to pay your mortgage if:
It’s important that you also think ahead and plan how you’d meet your payments. For example, you can help to protect yourself against unexpected drops in income by building up savings when you can. Try to make sure it contains enough for three months’ outgoings, including your mortgage payments. Government schemesIf you’re struggling to get approved for a mortgage or only have a small deposit, there are a number of government schemes available to help. Was this information useful? Thank you for your feedback. We’re always trying to improve our website and services, and your feedback helps us understand how we’re doing. Share this with Copy this link  Looking for us? Now, we’re MoneyHelper MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper. Continue to website Do not show this message again for Money Advice Service Looking for us? Now, we’re MoneyHelper MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper. Continue to website Do not show this message again for The Pensions Advisory Service Looking for us? Now, we’re MoneyHelper MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper. Continue to website Do not show this message again for Pension Wise What is the 36% rule?A Critical Number For Homebuyers
One way to decide how much of your income should go toward your mortgage is to use the 28/36 rule. According to this rule, your mortgage payment shouldn't be more than 28% of your monthly pre-tax income and 36% of your total debt. This is also known as the debt-to-income (DTI) ratio.
What is the maximum amount she can afford to borrow for a home mortgage?The general rule is that you can afford a mortgage that is 2x to 2.5x your gross income. Total monthly mortgage payments are typically made up of four components: principal, interest, taxes, and insurance (collectively known as PITI).
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How much can i get approved for a home loan
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