Definition of the debt ratio: the debt ratio is the maximum percentage of debt that can be borrowed.

The debt ratio generally corresponds to 33% of indebtedness but can rise to 35% depending on the situation. The calculation of this rate corresponds to the sum of your fixed expenses divided by the total of your income, multiplied by 100.

 

Calculate the debt ratio

Calculate the debt ratio

Annual net revenue
(salaried professional income) Personal contribution
(including CEL, PEL, 1% employer) – + Amount of the property
Excluding notary fees (from 0 to 2MK €) – +

  • value of the loan

    0 €

Duration of the loan year (From 5 to 40 years) – + Interest rate in% (from 0 to 10%) – + Monthly fees – +

  • Total cost of interest

    0 €

  • Rate of endettement

    0 %

 

The results obtained using our calculators are informative and non-contractual.

Murcef Act: no payment of any kind whatsoever, may be required of an individual before obtaining one or more loans of money.

If you wish to have a free and complete study of your real estate project, apply for a loan, within 24 hours you will receive a financing plan by mail, adapted to your situation.

The results obtained using our calculators are informative and non-contractual.

 

how to calculate the debt ratio?

How does the debt ratio affect your borrowing capacity?

Your current debt ratio is the total of your expenses (current credits, monthly rent) on all of your income, multiplied by 100. It shows you the margin available to take out a new mortgage.

Calculate your debt ratio using the following formula: ( Debt charge) x 100 / (net income) = Debt ratio
With:

  • borrowing cost: sum of monthly payments of current loans + ready to subscribe
  • net income: net income of each borrower

 

How does the debt ratio affect your borrowing capacity?

The debt ratio is a term that is often used when it comes to talking about a budget or buying a new property. But what exactly is it?

Before signing a sales agreement, evaluate your debt capacity. This will allow you to orient your property search within the price range corresponding to your borrowing capacity.

 

how it works ?

In general, the debt considered by the lender, as being correct, is about 33% (or 1/3 of your income). Banks use this index to assess your repayment capacity (solvency). This is the percentage of total credit charges (all credits: consumption, revolving, revisable, auto, real estate) compared to the income of borrowers.

 

What limits to the debt ratio?

It is important not to have too much rate (the banks analyze your financial situation), so the maximum total effective rate not to be exceeded is 33%. It is necessary to be careful not to be over-indebted, it is for this reason that the repurchase of mortgage exists.

 

What income is taken into account when calculating the debt ratio?

What income is taken into account when calculating the debt ratio?

The income taken into account

Each lending institution has its own rules regarding income taken into account . But you can at least include this income in the calculation of the maximum debt ratio:

  • net salary (for each borrower)
  • premiums
  • thirteenth month
  • non-salaried professional income
  • commissions
  • alimony
  • any other pension (disability, retirement …)
  • housing benefits (APL)

 

Revenues not taken into account

You can exclude the following income from the calculation of the debt ratio:

  • exceptional bonuses (non-contractual, therefore seen as non-regular by the banker)
  • professional allowances (occupational illness or work accident)

The debt ratio is a term that is often used when it comes to talking about a budget or buying a new property. But what exactly is it?

 

How to optimize your debt ratio?

How to optimize your debt ratio?

Depending on your situation, there are several solutions to optimize your debt ratio and highlight your file with a credit institution.

 

High income

In the case of a high net salary, banks will be more flexible if you can prove that your fixed costs can be above the 33% threshold.

 

modest income

In the case of low incomes, credit institutions calculate the “rest to live” which determines whether the household can support itself after payment of the credit. The “rest of life” will be calculated based on residual income per person after payment of loan charges and other expenses. The debt ratio is acceptable when the sum per person remaining available makes it possible to support current expenses.

The debt ratio of 33% can be modulated upwards or downwards, depending on the study of your loan file. For a household with comfortable incomes, with a high “rest to live”, your bank can accept a debt ratio of 35% or more. On the other hand, some borrowers (or co-borrowers) with lower or less regular incomes will not be able to obtain loans above 30% of indebtedness.

 

Variable income

In the case of variable income, it is important to take into account your fixed salary as a basis. Depending on your seniority, the lending institution will be able to average your salaries over the past 3 years and include bonuses and commissions.

 

Appealing to a mortgage broker

In order to obtain your loan in the best conditions and to refine your debt ratio you can call on a credit expert who will negotiate for you a lower borrowing rate and a cheaper external borrower insurance. Make sure you get a loan with the lowest mortgage rate with a credit broker! 

 

Do not confuse debt and over-indebtedness

over-indebtedness

It is important to make the difference between these two words that are similar but do not have the same meaning, being in debt and over-indebted does not have the same impact ! In the case of a debt situation , you have one or more loans that you are paying and for which you pay a monthly payment without any problem. In the case of over-indebtedness , you are unable to pay your loan and you will be faced with bank charges, agios or late penalties. 

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