The primary factor influencing your mortgage amount is income. If you’re on a permanent contract, you can include your current earnings, holiday allowance, and any 13th-month pay you might receive. Overtime and regular bonuses can often be counted as well.
For those with a temporary contract or self-employed, the average income over the past three years is typically used for calculations. However, additional options may be available to you. You can read our detailed article or schedule a free consultation to learn more.
2. The mortgage rate
A mortgage rate sounds good, but there’s a catch. If you lock in that rate for less than 10 years, the bank might not use it to calculate your maximum mortgage. Instead, they’ll use a fixed rate, which the AFM sets quarterly. In the past few years, the rate was 5,0%, but it can change every few months. Why? The mortgage provider wants to be sure you can still afford the mortgage if rates jump up after your period of fixed interest ends. If you choose a short-term rate, you might get approved for a smaller mortgage amount.
3. The value of your dream home
One key thing affecting how much you can borrow for a house is the “loan-to-value.” It’s the ratio between how much you want to borrow and the home’s value. The smaller this ratio, the lower the interest rate charged. And with a lower interest rate, the maximum mortgage sum goes up a bit. If you are considering renovating the home or investing in sustainability, then consider unique construction or energy improvement loans.
4. Financial obligations
How much you can borrow for a house isn’t just about your income. It’s also about debts that you might have. For example:
- Student loans
- Bank loans
- Credit cards
- Phone plans
- Car leases
5. Housing expense factor
Another key element influencing your mortgage is the “housing expense”, which refers to the portion of your income allocated for mortgage payments.
This metric is contingent on several factors:
- Your income, as well as your partner’s income, if applicable
- The prevailing interest rate and the duration for which you lock it in
- Whether you’re in retirement or still in the workforce