Many people want a big and beautiful house to live in. And they are prepared to take out a high mortgage if necessary. Prime mortgages are less common than they used to be, because legitimate lenders are careful about issuing loans that may not be repaid. It is better to be sensible when determining your maximum mortgage amount. How much can you safely borrow for your dream home? What is your maximum mortgage amount? A lender will always try to limit the risks associated with the mortgage. A bank earns money from a mortgage loan but always runs the risk that the loan cannot be repaid when the time comes. It is therefore logical that the lower the risk is estimated, the higher the maximum mortgage amount will be. And vice versa: With a high risk, the lender will be less likely to lend or limit the maximum loan amount. That is the basis of mortgage lending, but there are even more factors that determine how high the maximum loan amount for the mortgage will be in your specific case.
What determines how much you can borrow?
You will be asked about your gross income on an annual basis. You can simply add any fixed allowances such as a thirteenth month or your holiday allowance. Varying parts of income such as a one-off bonus should not be counted, because they are not a fixed part of your income.
The partner’s full income is taken into account if you take out the mortgage together with the partner. The calculation of the partner’s gross income is done in the same way as explained above for the first mortgage holder.
Based on your age, position, company you work for and other factors, an estimate is made of what your income will look like in the future. When you are on a growth path, there is a chance that you will earn more. However, if you work for a company that is in the middle of reorganization, there is of course a possibility that you will lose your income or at least that it will be temporarily lower and a bank will probably take this into account.
Existing debts and obligations
It will be checked whether you already have other fixed obligations that you must meet with your income. Consider monthly payments for loans or credit cards, but also alimony, for example. Even store cards are seen as a debt and an interest-free student loan also counts.
Dealing with guilt
As with other personal loans, you will be tested at BKR, which means that the Credit Registration Office in Tiel will check which loans you have outstanding and what your behavior has been in recent years. Have you had any arrears or have you been overdrawn? Here too, loans (even loans that have already been repaid), credit cards and personal cards from department stores are taken into account. Your limit on your current account also counts!
Economic climate and interest rates
The economic climate partly determines how much risk a lender will take on. In these times, the provider will be careful about providing high loans. That makes sense. The interest rate is also related to this and your maximum mortgage amount always depends on how high the interest rate is at that time.
Value of the property
Only now is the value of the property coming into focus. How much do you need to borrow and what is the actual value of the property if it has to be sold by the bank in an emergency?
How do you calculate your maximum mortgage?
Borrowing under NHG (National Mortgage Guarantee)
To protect yourself against a loan that is too high and to benefit from a discount on mortgage interest, you can use NHG for loans up to EUR 350,000 (from 01/08/2009). NHG can also ensure that if you get into trouble with your loan through no fault of your own, the remaining debt can be waived, under certain conditions. With NHG you can borrow safely and responsibly, but you certainly will not get the highest loan.
Code of conduct for mortgage financing
A code of conduct for mortgage loans was introduced in 2007. A mortgage provider is obliged to apply this when determining the maximum loan amount. The code of conduct must protect you against excessive mortgage debt. The indication for the maximum loan is 4.5 times the gross annual income. This means that with an annual income of EUR 70,000 gross you can borrow approximately €300,000.
Conclusion: Don’t count yourself rich
If you look at all the restrictive conditions, it is logical that the lender does not include them for nothing. He really wants to sell and will therefore not give you a low indication to bully you. The protective measures are also there for a reason when it comes to your safety. Protect yourself and do not borrow too much and be careful where you take out a loan: When a provider deviates a lot from the code of conduct, this is not necessarily what is ultimately best for you. Before you decide where to take out a mortgage, do your research. A dream house is only a dream house if you don’t wake up worrying at night.