How do I know which mortgage I can apply for?

Buying a home is one of the most important financial decisions in anyone’s life. One of the first questions that arises when starting this process is: ‘What mortgage can I afford?

Answering this question is fundamental to avoid an excessive financial burden and to ensure long-term financial stability. From our team of mortgage advisors, we offer you a guide to help you evaluate the key factors that will determine the mortgage you can afford and how to make informed decisions.

Calculate your net monthly income

The first step in figuring out what mortgage you can afford is to calculate your net monthly income – that is, what you receive after taxes and other deductions. This includes all sources of income, such as your salary, bonuses or rental income. Having a clear picture of your income will allow you to set a proper budget. To help you, we’ve created a free resource with 20 questions and answers to guide you in choosing the ideal mortgage.

Assess your monthly expenses

Next, assess your monthly fixed expenses, such as rent, utilities, food, transportation, insurance and other debts. Being honest and accurate in this assessment will help you see how much money you have available after your basic needs are met.

Determine your ability to pay

A common recommendation is to allocate 30% to 35% of your monthly net income to your mortgage payment. This includes principal, interest, property taxes and homeowner’s insurance. You can use this ratio to calculate your ability to pay.

For example, if your net monthly income and your partner’s net monthly income add up to €4,000, your ability to pay would be:

35% of €4,000 = €1,400.

This means that you could afford a monthly mortgage payment of up to €1,400.

If you already have a home in mind and need to know if you could afford a mortgage of €250,000, or even €300,000, this calculation will help you estimate your monthly payments.

Saving for a down payment

The down payment is another important factor. The larger the down payment, the smaller the amount you need to finance, which reduces your monthly payments. Ideally, you should have at least 20% of the house price as a down payment, as banks usually offer better terms when this percentage is available. However, some lenders will accept lower down payments, which could result in higher monthly payments. It is always advisable to have a professional negotiate on your behalf to find the best terms.

Use mortgage simulators

There are several online tools, such as mortgage simulators, that allow you to calculate how much you could borrow and what your approximate monthly payment would be. These calculators consider things like interest rate, term and down payment amount. We recommend you try a simulator to get a clear idea of what you might be able to afford.

Consult a mortgage advisor

Finally, it is very useful to consult a mortgage advisor. These professionals can offer you a personalised perspective and help you through the process of applying for a mortgage. They will analyse your financial situation and guide you in choosing the best options available.

Knowing your mortgage capacity is key to a secure and sustainable home purchase. By calculating your income, assessing your expenses and taking your down payment into account, you will be in a better position to make an informed decision. Use online tools and consult with an advisor to get the best possible guidance. This way, you can enjoy your new home without compromising your financial stability.