Lending capacity defines the monthly loan payments that you are able to pay without dangerous debt. It then determines the amount of loans that the bank can grant you. Therefore, if you want to borrow more to strengthen your purchasing power, you need to optimize your borrowing capacity. To do this, here are 6 ways to follow.
Increase your savings capacity
Saving is a great way to increase your debt capacity. Also, in anticipation of your real estate project, establish a savings strategy with an appropriate device. Among other things, you can opt for the PEL (Housing Savings Plan) where your capital is blocked for at least 4 years. Also, if you want to withdraw your money at any time, don’t hesitate to save into your savings account A.
Reduce your fixed costs
The lender considers your fixed expenses to analyze the risk of your profile. It is therefore essential to reduce them if you want to increase your debt capacity. The expenses combine the debts you have to repay monthly and your usual expenses. Take the time to review them before submitting your mortgage application. Think before paying all your debts if possible. If not, opt for credit redemption. Also, try to save money on certain purchases and identify expenses you can avoid.
Play the loan term
The term of the loan affects both the loan amount and the loan rate. The shorter the term, the smaller the amount you can borrow. On the contrary, the longer the credit term, the lower the monthly installments will be. As a result, your borrowing capacity increases. For a large real estate project, therefore, it is advisable to bet on a long-term repayment (25 years for example).
Increase your personal contribution
The personal contribution is a capital lever for your borrowing capacity. The lender takes this into account when determining the loan amount. Furthermore, it generally does not lend more than the value of the property to be acquired. However, you will also have to pay the additional costs related to the loan, such as application fees and notary fees. The amount of your personal contribution will be used to cover them.
Play the competition
The loan offers offered by lenders are very diverse. Furthermore, banks do not all use the same criteria to assess a borrower’s debt ratio. As a result, your borrowing capacity may be higher or lower depending on the banking organizations you use. So remember to compete to find the one that works best for you. Don’t hesitate to call a real estate agent to assist you in this step.
Reduce financing costs by using subsidized loans
Subsidized loans are loans subsidized by public authorities. They aim to allow beneficiaries to purchase properties with favorable financing conditions. The PTZ or interest-free loan is the most popular device. As the name suggests, this is an interest-free loan. It allows you to finance up to 40% of the total amount of the acquisition. It applies to the purchase of a new property or an old property with major renovations.
If you haven’t had your primary residence for at least two years, you can apply for a zero-interest loan. However, there are conditions to be met regarding the income and the geographical location of the property in order to benefit from it. With this type of loan, you can reduce the amount of your mortgage and reduce the total cost. It is a real boost that will help you optimize your lending capacity.