Mortgages
How much mortgage can I borrow
Two ceilings decide it: income, which fixes the instalment a lender will accept, and savings, which cover the deposit. The lower one wins, and this shows which of the two is stopping you.
The two limits that set the amount
A lender looks at two things and takes the tighter. The first is income: the instalment must not pass a share of what comes in each month — a third is the common ceiling — and from that largest instalment the loan follows by running the French amortisation formula backwards. The second is savings: the mortgage covers at most a share of the property's value, 80% being the standard, and the rest, plus the purchase costs, has to be in hand already.
Knowing which of the two binds changes what to do next, because they move in different ways. If income is the limit, a longer term raises the amount at once: the same instalment over thirty years finances far more than over twenty, at the price of more interest overall. If savings are the limit, the term does nothing at all — the only lever is more deposit, or a cheaper property.
Purchase costs are the line most often left out of the sum. Tax, notary and agency fees easily reach 10% of the price, and none of it can be borrowed: it comes out of the same savings meant for the deposit. On a property of 200,000 with 80% advanced you need 40,000 of deposit plus about 20,000 of costs — 60,000 in cash, not 40,000.
Common mistakes
- Working the instalment off gross income instead of net. The one-third rule applies to what actually reaches the account: starting from gross inflates the answer by a quarter or more.
- Leaving out instalments already running. A car loan or a salary-backed loan cuts the available instalment euro for euro, and the lender sees all of them in the credit registers.
- Confusing the loan with the price you can afford. The mortgage is a share of the value: at 80% LTV, a loan of 160,000 buys a property of 200,000, and the 40,000 difference plus the costs has to be yours already.
Frequently asked questions
What is the largest instalment a lender accepts?
A third of net monthly income is the common rule, counting the other instalments already running. Some lenders go to 35–40% on high incomes, where what is left after the instalment is still ample, and stay below a third on low ones.
How much deposit does it take to buy?
Usually 20% of the price, since the mortgage covers 80% of the value, plus purchase costs of around another 10% that cannot be borrowed. On a property of 200,000 that is about 60,000 in cash.
Does a longer term raise how much I can borrow?
Yes, but only when income is what binds. For the same instalment, thirty years finances much more than twenty, because more of each instalment goes to capital and less to interest per period. The cost is the total interest, which rises appreciably.
Are 100% mortgages available?
They exist, usually for younger buyers with a public guarantee or with extra security, and they carry a higher rate. You can set the advance to 100% here to see what changes — remembering that the purchase costs are still yours.
How this calculation works
Largest instalment: R = income · share − instalments already running. Loan from income: the French amortisation formula run backwards, C = R·(1 − (1+i)^−n)/i, with i the period rate and n the number of instalments; at a rate of zero it becomes C = R·n. Loan from savings: the savings have to cover both the part not advanced and the costs, so savings = price·(1 − LTV) + price·costs, giving price = savings/(1 − LTV + costs) and loan = price·LTV. The amount available is the smaller of the two, and the instalment is recomputed on it: at the income ceiling it equals the largest instalment, at the savings ceiling it comes in lower.