The mortgage can be placed on the real estate property for which a loan is requested, but also on a real estate property independent of the loan request.
In case of non-repayment of the loan, the bank has the option to seize and sell the mortgaged real estate property.
Following the contraction in the number of mortgage loans observed in 2012 as a consequence of the financial crisis, there is often talk of “debt ratio.” This debt ratio is very important because it ultimately determines a person’s borrowing capacity.
By “debt ratio,” one should understand a ratio between a person’s income and expenses.
What income is taken into account?
Professional income, of course, and meal vouchers. However, family allowances, interest from financial products, financial products (stocks, bonds, etc.), and alimony are not taken into account because these incomes are unseizable. Generally, only seizable incomes can be taken into account. Thus, your broker will need to examine your file because some social benefits are seizable and others are not, such as unemployment benefits and an allowance granted by the CPAS, and therefore cannot be considered in the income calculation.
It should be noted that according to banking law, only provable income can be taken into account, and therefore the borrower will need to provide their tax assessment notice or their latest financial statement.
The expenses are mainly composed of the repayment of all debts (car financing, etc.) and the payment of any alimony.
To be able to borrow, the ratio between income and expenses must be within a range of 35 to 40% for a person who wishes to borrow alone. Of course, this ratio depends on the person’s income amount. Thus, if a person has very high income, like a European official, this ratio can be adjusted upwards as long as the borrower is able to meet their monthly repayment.
What would be the best ratio concerning income?
This ratio is within a range of 40 to 55% for married couples.
Of course, your broker will assess each case individually, and the borrowing capacity will depend on the loan duration and the amount borrowed.
It should be noted that these ratios result from an empirical analysis conducted by each bank and therefore vary from one bank to another. It is essentially the analysis of the bank’s disputes that determines its policy in this matter. The setting of these ratios is therefore not the result of the application of specific legislation.