Is it healthy to borrow? We live in a model of society that moves us to mortgage credit and other forms of financing to grow, since we are entities that build their economic independence and an equity over time.
The truth is that experts point out that it is necessary to borrow … but to some extent. What is known as borrowing capacity : that point that the payments of our debts do not threaten the viability of our life project .
How do banks calculate borrowing capacity?
That is an essential question when asking for a mortgage loan : it is the difference between the yes and no of an institution to our financing requests. But how banks calculate the borrowing capacity. good inventory, schedules and special high variety of products. A financial institution shall assess the cost of providing the service and adjusts ra prices, the value to borrow and raise money, ie rates. It is a free competition that must respond to the signals emitted by Vanhistolestos.
There is a rule that does not exist from which to estimate the capacity of indebtedness: you cannot borrow more than 40% of your total income . Some encrypt this capacity at a lower level: 30%. A higher percentage threatens the sustainability of the debt itself and the debtor’s lifestyle.
Is there a method in how banks calculate borrowing capacity?
Each institution determines the borrowing capacity of an applicant for a mortgage loan , and does so considering each case . And is that a single person without children and with some property does not have the same borrowing capacity as a couple with two children and who are looking for their first home.
The formula that answers the question of “ how banks calculate debt capacity ” in most cases is the following:
CE = (IT – GF) x 0.35
- CE is the Debt Capacity
- IT: Total Monthly Net Income (payroll, bank deposits, investments)
- GF: Fixed Expenses (payment of services, credit cards and other credits)