1. Evaluate Your Income
Start by determining your net monthly income, which is the amount after tax deductions and social security contributions. Include all sources of income: salaries, bonuses, rental income, alimony, etc.
2. Estimate Your Expenses
List all your monthly expenses:
- Fixed expenses: current rent, existing loans, insurance, subscriptions.
- Variable expenses: food, transportation, leisure.
- Exceptional expenses: vacations, repairs.
3. Calculate Your Debt Capacity
Generally, financial institutions recommend not exceeding 33% of your net income for debt repayment, including the mortgage. To calculate this capacity:
DebtCapacity=NetMonthlyIncome x 33
100
4. Determine Your Down Payment
The down payment is crucial. Ideally, it should represent between 10% and 20% of the property price. This down payment facilitates loan approval and covers ancillary costs such as notary fees and processing fees.
5. Calculate the Maximum Monthly Mortgage Payment
Based on your debt capacity and current expenses, determine the maximum monthly payment you can allocate to a mortgage. Remember to include borrower’s insurance in this calculation.
6. Simulate Different Loan Scenarios
Use online loan calculators to estimate the amount you can borrow based on various durations and interest rates. This will give you a precise idea of the budget you can allocate to buying your property.
Conclusion
Calculating your real estate budget is essential to ensure a confident purchase. By evaluating your income, expenses, debt capacity, and determining an adequate down payment, you can find a property that fits your financial means without compromising your quality of life.
