What is the maximum amount I can borrow for a mortgage?

After months of searching, you have found your dream home and now you want to know if it is financially feasible to actually buy it.

So how do you find out and what are the ifs and buts? We’ve figured that out for you and explain as best we can below. There are a number of factors that are important:

1. Income

You will have seen this one coming yourself; the banks want to know what your gross income is and would like to see a recent pay stub from this. This allows the bank to estimate whether you will have enough money coming in to pay your monthly expenses.

If you have a permanent contract, we include under gross income the salary, your vacation pay and any fixed thirteenth month or year-end bonus.

But of course, it is also possible that you have a fixed-term contract or are a self-employed person, for example. Then the bank takes a different approach. Usually they then want to see a statement from the employer that they are going to convert your contract to an open-ended contract (letter of intent).

And as a self-employed person, they want to see the accountant’s annual figures. This can sometimes include other things such as a bonus or structural overtime. But that really needs to be calculated in detail. This is where the advisors at Nobel Mortgages can be very helpful.

2. Mortgage Interest

Mortgage rates are always subject to change. The best part is when it is low, because then you have to pay less interest on your borrowed money. Be sure to take out your loan for at least 10 years, otherwise a lower maximum mortgage amount may come out of the calculation.

This is established as follows. If you fix your interest rate for less than 10 years, your maximum mortgage amount is not calculated using the current interest rate, but with a key interest rate of 5%.

After the fixed-rate period expires, your monthly expenses can actually go up dramatically because of increased mortgage rates. The risk to the bank is higher in that case.

Because the bank wants to make sure you can continue to pay your mortgage beyond that fixed-rate period, they estimate monthly payments a lot higher using the test interest rate.

3. Value of the house

Also not unimportant in this one is the actual value of the dream home you have your eye on. How much will you take out a mortgage for and what is the value of the home?

You cannot borrow more than the house you have your eye on is worth anyway. And to determine the current value of the house, you can hire an appraiser who will then issue an appraisal report.

So the value of your dream home has a lot of influence on the amount of your mortgage as well as the amount of your own money you need to buy the house.

Do you still want to DIY, remodel and/or preserve? Then it is possible to opt for a construction deposit.

A building deposit is a special, escrow account where you set aside an amount of money for a planned remodel or new construction. It is part of your mortgage. From the construction deposit, you pay the invoices for the work and materials.

4. Financial obligations

Your mortgage advisor will also want to know from you if you have any financial obligations that may affect your monthly spending amount. These may include, for example, the following:

  • A student debt
  • Being in the red at the bank
  • A credit card where you may repay in instalments (i.e. a kind of loan)
  • A smartphone on installment
  • A private lease for your car

These all seem like innocuous contracts but actually affect your monthly expenses and therefore what maximum amount you can borrow. This is because you get, the often well-known, BKR registration behind your name and this can cause restrictions when applying for your mortgage.

5. Residential quote

This one is a little less well-known but no less important: the housing ratio. The housing ratio is the percentage of your gross assessment income that you are allowed to spend on paying off your mortgage (including interest) at most. The housing ratio depends on the following:

  • Your income and that of your partner, if any
  • The actual mortgage rate
  • The fixed-interest period you choose
  • Whether you are retired

The housing ratio is reset annually. This quote exists because in addition to your housing costs, you need to keep enough money for your groceries, healthcare costs, and other living expenses. In this way, a lender cannot lend more than what is affordable for an average family. This reduces the risk of financial problems for both you and the lender.

6. Loan Standard

To prevent you from borrowing too much and getting into financial trouble, the bank also looks at your income and your fixed expenses. They also determine how much money you should have left after paying your monthly principal and interest each month to live on. The latter is called the loan standard.

This loan standard is reset annually; the new rules for 2023 are:

  • The income of dual earners counts 100% (instead of 90% of the second income in 2022)
  • Lower-income households (up to €31,000) can borrow less to avoid the risk that inflation will make them unable to pay their basic expenses

Seeing through the trees and forest?

At Nobel Mortgages, we are happy to assist you with quality financial advice and think along with you about all questions. Calculate how much you can borrow for a mortgage easily online. We always go the extra mile for our clients, truly analyzing all options and always thinking outside the box when necessary.

In this way, you are sure to achieve what others cannot. That is, we do everything we can to help you get the best mortgage that suits you and, of course, fits your circumstances and desires perfectly.

Do you also want an advisor who looks outside the box and really analyzes all the possibilities for you?

Then contact our experienced and enthusiastic team soon. We are available to you 24 hours a day with the utmost commitment and sincere attention. An e-mail is a snap to info@nobelhypotheken.nl or call or app to 06-54770122.