How to increase your property purchasing power?

The calculation of financing for a purchase of luxury real estate depends on many criteria. The purchasing power of a property can vary according to price and interest rate trends. A property purchase must be prepared well in advance and there are solutions to increase your purchasing power. 

The debt ratio and term

The first thing to calculate when you start buying a property with a loan is the notion of the debt ratio and the term, which influence the total capital borrowed.

The debt ratio is now limited to 35% of income (salary, rental income, etc.) and the maximum term in the case of older properties is 25 years. The remaining balance, even if it is high, does not always allow the amount of the mortgage to be increased. However, banks can derogate from the ceilings set by the HCSF for 20% of their production, and essentially for financing primary residences.

It is best to keep these rules in mind when you want to increase your purchasing power. Thus, it is possible to go to the maximum of one's borrowing capacity by extending the debt ratio and the term. Bear in mind, however, that most banks do not finance beyond the age of 75 at the end of a loan.

By extending the term and the debt ratio, you can therefore borrow a larger amount. On the other hand, the total cost of the loan will be higher, even if rates are extremely low at the beginning of the year.

Personal contribution

To increase your purchasing power, the value of your down payment is essential. The higher the deposit you add to your loan, the greater your borrowing capacity. Note that the level of deposit required by banks has risen sharply and that it is not uncommon to have to present 20% of the property purchase price to obtain a loan. If you have exceptional bonuses, you can add them to your deposit to increase your purchasing power. 

The interest rate

Of course, to get a better loan, the interest rate is very important. With a high income and a high down payment, you will certainly have access to the best market conditions to finance the purchase of your flat or house.

To obtain a better rate, don't hesitate to use a broker. By lowering the interest rate, you will be able to increase your capital and maximise your loan. There are other ways to increase the interest rate, with packages (very useful if you are buying a second home) that you will need to discuss with the banker depending on the repayments you may have outstanding. Finally, don't forget the cost of borrower's insurance in your loan and your right to compare it to negotiate the most competitive loan.