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Calculate Your Real Estate Budget : How Much to Borrow ?
Assessing your borrowing capacity is essential for planning your acquisition potential. Fortunately for you, calculating your real estate budget has never been easier : Agenz provides you with a free online calculator.
This tool estimates the amount around which you can purchase a property based on your borrowing capacity, which depends on your financial situation.
So, are you ready to discover how much you can borrow? Let's go!
Calculating Your Real Estate Budget : Elements Considered by the Agenz Budget Calculator
It may sound a bit intimidating, but don't worry; there are only a few things to consider :
Your Monthly Income :
This is the key factor for any real estate loan! It's simply the amount of money you earn each month after paying taxes and other deductions. In other words, it's what will enable you to repay your loan without putting yourself in financial distress. Remember that if you have a co-borrower, you should also add their income to get the total.
Monthly Debts to Repay :
This is the total of all the expenses you need to repay each month. This includes monthly payments for your auto loan, your loan for buying that fancy TV in the living room, or any other consumer loans. If you have monthly bills to pay for previously contracted debts, you should add them to get your total debt. For example, if you have a monthly payment of 2,500 MAD for your car and a minimum payment of 500 MAD for an appliance loan, your total monthly debt would be 3,000 MAD.
Your Initial Down Payment :
The down payment is like your personal contribution to the purchase of your house or apartment. Most banks usually require a down payment between 10% and 20% of the total price. In short, the more money you set aside for the down payment, the less you'll have to borrow, and therefore, the lower your monthly installments will be. For example, for a house priced at 1,000,000 MAD, a 10% down payment would be 100,000 MAD, while a 20% down payment would be 200,000 MAD.
Your Debt-to-Income Ratio :
The debt-to-income ratio is the figure that determines whether you are financially "in the green" or "in the red." It is calculated by taking the total of your monthly debt payments and dividing it by your monthly income, expressed as a percentage. Banks closely examine it to assess whether you can repay the amount you want to borrow. Our default budget calculator suggests a debt-to-income ratio of 45%, but be aware that each bank has its own criteria, and it can vary depending on your profile.
Loan Interest Rate :
The interest rate is like the extra cost you pay for the privilege of borrowing money. It's expressed as an annual percentage of the capital you still owe, and it's set by the bank. You will have to repay your loan, including both the principal and interest, over a defined period. Our budget calculator uses the current national average interest rate to help you estimate the cost of your loan.
Loan Term :
The loan term is the time you will spend repaying your property.
By default, our budget calculator suggests a 25-year (300 months) term, but if you want to speed up or slow down the pace, you can always adjust it in the advanced options.
Property Tax:
When you own a property, you must also pay property tax every year. This tax is calculated based on the value of your real estate and the city where it is located. So, it's an expense to consider when you're thinking about buying a house or apartment. But don't worry, our budget calculator takes into account an estimate of property taxes to help you plan your budget. And if you want a more precise estimate, you can adjust it in the advanced options.
Home Insurance :
You don't want your home to be exposed to life's uncertainties, do you? That's why most banks require home insurance to protect your property in case of incidents like fire, water damage, or others. And because we want you to be covered without breaking the bank, we offer an estimate of basic home insurance with a cost of around 350 MAD per year.
Loan Insurance :
Loan insurance is your loan's safety net! In case of disability, incapacity, or death, this insurance can cover all or part of your debt (depending on the contract's conditions). The insurance amount is calculated as a percentage of the loan amount and can be paid upfront or spread over the repayment period (the rate usually ranges from 2.5% to 3.5% of the borrowed amount). Don't overlook this insurance; it can save you in case of unforeseen circumstances!
Calculating Your Real Estate Budget : How to Use the Agenz Budget Calculator
Now that you know what's considered, how do you use it?
Steps to Calculate Your Real Estate Budget
It's easy! Just follow these simple steps, and you'll get a quick and accurate estimate.
- Enter your financial information in the corresponding fields: this includes your monthly income, monthly expenses, savings, and current debts. By providing this information, you will help the calculator assess your borrowing capacity.
- Use the advanced options to fine-tune the estimate: if you want a more accurate estimate, you can also use the advanced options to adjust certain parameters, such as the loan term, property tax, and insurance.
- Get a quick and accurate estimate: once you have entered all the necessary information and used the advanced options (if needed), the calculator will display an estimate of the amount you can borrow and the maximum monthly installments.
Keep in mind that this estimate is only indicative, and banks have their own evaluation criteria for real estate loans. However, using the Agenz budget calculator can give you an approximate idea of your borrowing capacity and help you make wiser choices in your next real estate adventure.
Calculating Your Real Estate Budget : Practical Example
Want to see how it works in practice? Let's assume you have a monthly income of 10,000 MAD, and you want to make a down payment of 10,000 MAD. By using the Agenz budget calculator with an interest rate of 4.1% over 25 years, home insurance, and loan insurance, you can afford a property up to a value of 895,000 MAD. Your maximum monthly installment would be 4,700 MAD. Now you have an idea of what you can afford!
Conclusion :
There you have it! You now have all the information you need to use our Agenz budget calculator and estimate your real estate borrowing capacity. Feel free to use this tool to make the best financial decision for your next real estate purchase. We hope this article has been helpful, and you're ready for new real estate adventures!
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