How much can I pay for my house?

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Buying a house is one of the biggest financial decisions you will make in your life. It is not only an emotional investment but also one with significant and long-lasting financial implications. A crucial question many ask is: How much can I actually afford to pay for my house? This can be a difficult question to answer. In this blog we discuss a number of considerations on how to think about this question. This blog is part of a series on our platform. Do you want access to our entire series 'Your journey towards home ownership'? Contact us!

Your income

One of the most important factors in determining your maximum mortgage is your income. Generally, the higher your income, the more you can borrow. However, it’s not just your gross income that counts. Lenders (the party providing the mortgage) also look at your net income after deducting taxes and other financial obligations.

Besides your income, lenders also consider your financial obligations. This includes loans, student debt, alimony, and other debts registered with the Credit Registration Office (BKR). Even if you have paid off these loans, they can still affect your maximum mortgage.

The rule of thumb you can follow: 4.5x your gross income = the amount of your maximum mortgage.

It’s important to consider your entire financial picture when thinking about a mortgage, so discuss with one of our financial planners how your maximum mortgage might look.

A good mortgage advisor can also make a world of difference. Check out the blog on mortgage advisors on the Equip platform to choose a good mortgage advisor.

Age and contract

Age also plays a role in obtaining a mortgage. As you get older, lenders may consider you a senior, which can affect the terms of your mortgage. Additionally, your employment status is important. Are you an employee? Lenders often want to see a permanent contract. Different rules apply to the self-employed, making it more challenging to get a mortgage with good terms.

Value of the house and 'loan-to-value'

The value of the house and the so-called ‘loan-to-value’ ratio also play a role. Lenders want to know the value of the house and how much of that value you want to borrow. This ratio is called the ‘loan-to-value’. It can affect the maximum amount you can borrow and the mortgage interest rate you pay. This often applies throughout the term of your mortgage. So, if the ‘loan-to-value’ ratio falls below a certain threshold, for example, due to an increase in the value of your house or by paying off your mortgage, you may qualify for a lower mortgage interest rate. Discuss this with one of our financial planners if you think this might apply to you. You need to take action yourself to benefit from this advantage!

Buying together or by yourself: shared income

Are you buying the house alone or with someone else, such as your partner? If you buy together, lenders use both incomes to calculate the maximum mortgage. This can significantly increase your maximum loan amount.

Energy label and sustainability

Starting in 2024, the energy label of the house will also influence the maximum mortgage. A greener energy label can mean you can borrow extra. Additionally, you can borrow extra for making your new house more sustainable, provided you spend this money on energy-saving measures.

Conclusion

Determining how much you can pay for your house is a complex process that depends on various factors, including your income, age, financial obligations, the value of the house, and even the energy label. It is important to carefully consider all these factors and make well-informed decisions that suit your personal financial situation and future plans.