A mortgage loan is a loan granted under the condition of mortgaging one or more real estate properties that constitute the borrower’s assets.
The mortgage can be carried out on the real estate property for which a loan is requested, but also on an independent real estate property separate from 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 a “debt ratio”. This debt ratio is very important because it ultimately determines a person’s borrowing capacity.
By “debt ratio”, we mean 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, financial product interests, financial products (stocks, bonds, etc.), alimony are not taken into account because these incomes are unseizable. Overall, only seizable incomes can be taken into account. Thus, your broker will need to examine your file as some social benefits are seizable and others are not, such as unemployment benefits and allowances granted by the CPAS, and therefore cannot be included in the calculation of income.
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 return 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 should be between 35 to 40% for a person wishing to borrow alone. Of course, this ratio depends on the person’s income level. 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 in relation to income?
This ratio is between 40 to 55% for married couples.
Of course, your broker will evaluate each case individually and the borrowing capacity will depend on the duration of the loan and the amount borrowed.
It should be noted that these ratios result from an empirical analysis carried out by each bank and therefore vary from one bank to another. It is mainly 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.
