Simulate your borrowing capacity: estimate your financial potential

To calculate your borrowing capacity for a rental property investment, you need to take into account several elements:

• Monthly income: Include your fixed income, as well as existing and planned rental income.
• Monthly expenses: Include your fixed expenses, such as repayments of other loans, alimony, etc.
• Debt ratio: Banks generally accept a maximum debt ratio of 35%.
• Personal contribution: The larger your contribution, the more you can borrow.
• Loan duration: The duration of the loan affects the amount of the monthly payments and therefore your borrowing capacity.

Once you have gathered this information, you can use a calculation formula or our online simulator to estimate your borrowing capacity.

Banks consider several criteria when determining your borrowing capacity:

• Income: Your fixed and regular income is a key factor in assessing your ability to repay a loan.
• Debt ratio: Banks generally consider a 35% debt ratio to be the maximum acceptable.
• Personal contribution: A substantial contribution reassures banks about your ability to finance your real estate investment project.
• Professional situation: Banks favor borrowers with a stable professional situation (permanent contracts, public service).
• Banking history: A good repayment history of previous loans and the absence of banking incidents are positive elements for your application.

These criteria may vary from one bank to another, but they are generally used to assess your borrowing capacity.

To estimate the amount of your personal contribution, you need to add up the amounts you have available:

• Personal savings (savings accounts, bank accounts, etc.)
• Employee savings (Employee Savings Plan, Collective Retirement Savings Plan)
• Donations and inheritances
• Family benefits (social housing loan, zero-interest loan, etc.)

A substantial personal contribution has a positive impact on your borrowing capacity:

• It reassures banks about your ability to finance your real estate investment project.
• It allows you to reduce the total loan amount and therefore the interest to be repaid.
• It can help you obtain better credit terms (interest rate, loan duration, etc.).

The mortgage term has a direct influence on your borrowing capacity:

• Longer term, the lower the monthly payments, which can increase your borrowing capacity. However, this also results in a higher total cost of the loan due to interest.
• Shorter term, the higher the monthly payments, which can reduce your borrowing capacity. On the other hand, the total cost of the loan will be lower.

By adjusting the loan term to your financial situation and your repayment capacity, you can optimize your borrowing capacity and the total cost of your mortgage.

Additional income can be taken into account when calculating your borrowing capacity, provided it is regular and stable:

• Rental income (rent received)
• Land income (income from renting land, forests, etc.)
• Financial income (dividends, interest, etc.)
• Alimony received
• Income from self-employed activities (self-employed, freelancers, etc.)

It is important to provide banks with proof of this income (tax returns, rent receipts, etc.) so that they are taken into account when calculating your borrowing capacity.

The debt ratio is a key indicator for banks when evaluating your borrowing capacity. It corresponds to the ratio between your monthly expenses (loan repayments, alimony, etc.) and your monthly income.

Most banks consider a 35% debt ratio to be the maximum acceptable for granting a mortgage. This rate ensures that you have enough income to repay your loan while meeting your regular expenses.

To calculate your debt ratio, divide the sum of your monthly expenses by the sum of your monthly income, then multiply the result by 100. A debt ratio below 35% increases your chances of obtaining a mortgage and optimizing your borrowing capacity.

To optimize your borrowing capacity and obtain the best mortgage conditions, here are some tips:

• Increase your income: If possible, seek to increase your fixed and complementary income (promotion, overtime, rental investments, etc.).
• Reduce your expenses: Pay off your existing loans, reduce your regular expenses, and avoid bank overdrafts to improve your debt ratio.
• Build a personal contribution: Save regularly and use the available savings devices (savings accounts, employee savings, etc.) to build a substantial contribution.
• Compare loan offers: Make banks compete and use a broker's services to obtain the best credit conditions (interest rate, loan term, etc.).
• Take advantage of aid devices: Learn about the available subsidized loans and tax incentives (zero-interest loan, Pinel scheme, etc.) to optimize your mortgage financing.

An online simulator is a practical tool for estimating your borrowing capacity. Here's how to use it:

• Enter your income: Indicate your fixed and complementary monthly income (salary, rent, pensions, etc.).
• Enter your expenses: Indicate your fixed monthly expenses (other ongoing loans, alimony, etc.).
• Choose the loan term: Select the desired term for your mortgage.
• Enter your contribution: Provide the amount of your personal contribution.

The simulator will provide you with an estimate of your borrowing capacity based on the information entered. Keep in mind that this estimate is indicative and the actual conditions of your mortgage will depend on your application and bank offers.

It's important to distinguish between borrowing capacity, purchasing capacity, and repayment capacity:

• Borrowing capacity: This is the maximum amount you can borrow from a bank to finance a real estate investment project. It depends on your income, expenses, personal contribution, and loan term.
• Purchasing capacity: This corresponds to the total amount you can invest in a property, taking into account your borrowing capacity and personal contribution. Purchasing capacity also includes ancillary costs related to the purchase (notary fees, guarantee fees, etc.).
• Repayment capacity: It refers to your ability to repay a loan based on your income and expenses. Repayment capacity is generally assessed through the debt ratio, which must be below 35% to obtain a mortgage.

Subsidized loans and tax incentives can influence your borrowing capacity in several ways:

• Subsidized loans: They help complete your mortgage financing and increase your borrowing capacity. Among the subsidized loans are the zero-interest loan (PTZ), the social housing loan (PAS), and the conventional loan. These loans are generally subject to income conditions and/or specific real estate projects (purchase of a new home, energy renovation, etc.).
• Tax incentives: They help reduce your income tax and increase your available income for loan repayment. Among the tax incentives are the Pinel scheme for rental investment, the Malraux scheme for the renovation of old real estate, and the Censi-Bouvard scheme for investment in service residences. These schemes are subject to specific conditions (rental caps, rental duration, etc.) and should be considered in your real estate investment strategy.

By judiciously combining subsidized loans and tax incentives, you can optimize your borrowing capacity and maximize the return on your real estate investment.

Interest rates play a significant role in your borrowing capacity:

• Low interest rates: Low interest rates reduce the total cost of the loan and allow you to borrow more at equal monthly payments. This has the effect of increasing your borrowing capacity and facilitating access to property ownership or rental investment.
• High interest rates: Higher interest rates increase the total cost of the loan and reduce your borrowing capacity at equal monthly payments. This can make access to property ownership or rental investment more difficult.

It is therefore important to monitor interest rate developments and choose the right time to take out a mortgage in order to optimize your borrowing capacity.

Changes in income and professional situation can impact your borrowing capacity:

• Increased income: An increase in your income (promotion, job change, etc.) can improve your borrowing capacity by increasing your repayment ability and reducing your debt ratio.
• Decreased income: A decrease in your income (unemployment, reduced working hours, etc.) can reduce your borrowing capacity by decreasing your repayment ability and increasing your debt ratio.
• Change in professional situation: Moving from a fixed-term contract (CDD) or self-employed activity to a permanent contract (CDI) can improve your borrowing capacity by reassuring banks about the stability of your income.

It is therefore important to consider the evolution of your income and professional situation as part of your real estate investment project and adapt your borrowing strategy accordingly.

To increase your borrowing capacity and achieve your real estate investment project, here are some tips:

• Increase your income: Seek a promotion, work part-time, or invest in rental assets to increase your income.
• Reduce your expenses: Pay off your current debts, reduce your regular expenses, and avoid bank overdrafts to improve your debt ratio.
• Build a personal contribution: Save regularly and use available savings devices (savings accounts, employee savings, etc.) to build a substantial contribution.
• Take advantage of aid devices: Learn about subsidized loans and tax incentives (zero-interest loan, Pinel scheme, etc.) to optimize your mortgage financing.
• Compare loan offers: Make banks compete and use a broker's services to obtain the best credit conditions (interest rate, loan term, etc.).

By following these tips and adapting your borrowing strategy to your financial situation, you will be able to increase your borrowing capacity and achieve your real estate investment project.

Here are some mistakes to avoid when calculating your borrowing capacity and searching for financing:

• Underestimating your expenses: Be sure to include all your monthly expenses (current loan repayments, alimony, etc.) to avoid overestimating your borrowing capacity.
• Not considering additional costs: When calculating your purchasing capacity, don't forget to include notary fees, guarantee fees, and agency fees.
• Not comparing loan offers: Make banks compete and consult a broker to get the best possible credit conditions.
• Neglecting subsidized loans and tax incentives: Learn about the available assistance to optimize your mortgage financing and increase your borrowing capacity.
• Waiting for an ideal financial situation: If you are able to carry out your real estate investment project now, don't wait too long to get started, as interest rates and market conditions can change.

By avoiding these mistakes, you can optimize your borrowing capacity and maximize your chances of success in your real estate investment project.