Refunds and GUARANTEES
Repayments are on a monthly bass and depend on:
- The loan amount
- The interest rate
- The financing term
In principle, repayment starts as from the grant of the home loan. However, most lending institutions allow the borrower to start repaying after a period of use to be agreed upon this is the deferred capital repayment.
Thus, if you have purchased a dwelling for which the construction or renovation is not yet completed and you are still paying rent for your current accommodation, you refund only the interests due over that period until you move house. The “normal” monthly payments are only paid as from the time you move house.
Take one third (33%) of your permanent income as a benchmark to make a good decision on the part of your budget to be allocated to monthly repayments of your home loan.
Do you wish to ensure that your budget is balanced? Maintain a suitable standard of living, taking into account your permanent income and your fixed expenses.
Example of calculating disposable income and repayment capacity
|The repayment capacity recommended in this example is: |
Monthly disposable income (5 756.00 €) x 33 % (i.e. one third of your income)
|= 1,899.69 €|
|Net monthly income of husband (after taxes) |
Net monthly income of the wife (after taxes)
+ Family allowances
+ Other fixed income (after taxes)
|3,000.00 € |
|TOTAL INCOME||6,185.60 €|
|- Current monthly expenses (current loans, insurance premium…)||429.00 €|
|NET MONTHLY DISPOSABLE INCOME||5,756.60 €|
This difference must not exceed +/- a third (1/3) of the monthly disposable income to ensure a decent standard of living.
The grant of a home loan is subject to certain basic conditions as well as guarantees required by the lending institution.
- The lending institution requires a personal contribution from the borrower (10 to 25% of the total cost) based on his personal situation and his repayment capacity. Generally, the bank is not willing to finance, for instance, costs which do not add to the property’s value, such as the insurance premium, mortgage fees, etc.
- In some cases (if the borrower’s repayment capacity is largely secure and the risk of default is limited), it is possible for the lending institution to finance the total cost of the loan.
- Thanks to the mortgage, the property is itself pledged to the lending institution, which reserves the right to offer the property for sale if the debtor no longer has the capacity to repay his loan. However, this is an extreme measure, only applied if there is no other solution.
- The lending institution generally also requires an outstanding balance insurance, which covers the balance to be repaid in the event of the borrower’s premature death.
- The lending institution requires the subscription to a fire insurance (generally free of charge) during the property’s construction period
- Other guarantees that may be considered are as follows:
- Assignment of salary
- Mortgage on another property
- Pledging of an investment portfolio account
- - Bank guarantee
- - Pledge of a life-insurance policy
- - Guarantee from another bank or endorsement of a third party
- - etc.
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