You've found your dream home and would like to know how much you can borrow to finance the purchase. Calculating your maximum mortgage is one of the first steps in this process. But how do you go about it? In this blog I explain it step by step.
Why calculate your maximum mortgage?
A mortgage is a major financial commitment you make for a long period of time. Calculating your maximum mortgage will give you a good idea of what is financially feasible. You'll avoid buying a house you can't actually afford.
Income: the basis of the calculation
Your income is the most important factor in determining your maximum mortgage. Grab your annual statement or your last paycheck and look at your gross annual income.
- Fixed income: Do you have a permanent contract? Then you can include this full amount in the calculation.
- Temporary or variable income: Do you have a temporary contract, are self-employed or have variable income? If so, the average income over the last three years is often considered.
Other financial obligations
Do you already have other loans, such as student debt or a personal loan? These debts are included in the calculation and may lower your maximum mortgage.
Mortgage interest rates
Mortgage interest rates also play a big role. A lower interest rate means lower monthly payments, which in turn affects how much you can borrow at most. Also consider the fixed-interest period.
Online tools and advisors
There are many online calculators available that allow you to get an indication of your maximum mortgage. Enter your details and you will be shown an estimate. For an exact calculation, it is advisable to seek advice from a mortgage broker. They can also take into account future changes such as retirement, children or changing interest rates.
Partner income
If you buy a house together with a partner, their income is of course also included in the calculation. Sometimes this allows you to get a higher mortgage. But beware: two incomes also means twice the financial responsibility.
Calculating your maximum mortgage is an important step if you want to buy a house. It gives you clarity about what you can afford and helps you focus on houses that are within your budget. It is wise to look at this carefully and seek professional advice. That way, you avoid getting into financial trouble later. Have you calculated your maximum mortgage? Then it's time to really start house hunting!
