How can you determine your financial capacity to buy a property?
You've decided to buy a home, but you're wondering what your maximum purchase price is. To calculate this amount, you need to consider two main factors: your gross annual income and your available equity. This article will explain how to determine your financial capacity to buy your property.
Knowing your equity and liabilities
Financing your house or flat will depend on your funds and outside capital. Equity capital refers to your own funds, such as savings, occupational or private pension capital (2nd and 3rd pillars), and any inheritance advance or donation.
Calculating shareholders' equity
You must finance at least 20% of the property's value from your own funds. However, at least 10% of this sum must come from equity capital other than that provided by your occupational pension scheme.
Foreign capital (mortgage)
You can finance up to 80% of the property with a mortgage. The 1st ranking mortgage can cover up to 66.6% of the property's value and cannot be amortised. The 2nd ranking mortgage will finance the remaining 13.4% of the property's value and will have to be amortised within 15 years or before your retirement, whichever comes first.
All you need to know about the advance rate and the debt ratio
Guaranteeing long-term financing
The basic principle for calculating the financial viability of your property project is that the costs of your property should generally not exceed 33% of your gross income. These costs include the notional interest, depreciation, and maintaining the property.