When looking for a property to purchase in Spain, there's often a question that lingers in our minds: What is the maximum mortgage I can request based on my income? In other words, what price can the property reach so that we can comfortably handle the installments?
It's not a trivial matter because underestimating the calculation can make us give up on a better house or apartment unnecessarily. It's important to know our borrowing capacity to choose the mortgage that best suits our circumstances.
It's important to know our borrowing capacity to choose the mortgage that best suits our circumstances.
What is the maximum mortgage I can request based on my salary?
The amount we can allocate to the purchase of a property will be determined by what is called the borrowing capacity, that is, the portion of our income that a person can allocate to debt repayment.
In the case of a mortgage, most experts recommend that the monthly installment does not exceed 30% - 35% of net income, allocating the remaining 65% to meet other needs such as food, clothing, leisure, and savings.
For example, a worker with an income of around €1,000 can afford a mortgage of around €350 per month; while someone with a net salary of €2,000 could handle a mortgage of up to €700 per month.
What should you consider for the calculation?
However, each personal situation is different, and factors that can affect the final amount of the maximum mortgage based on income can come into play.
In this sense, to know what monthly installment we will have to pay for the loan and what is the maximum mortgage to request based on salary, we must consider the following aspects:
• Associated expenses: In addition to the initial 20%, other expenses such as notary fees, registration, appraisal, and taxes must be added. It's also important to consider the future cost of maintaining the property, as it can increase significantly compared to the previous situation.
• Employment and personal situation: We must consider our current employment situation as well as our future prospects, such as whether we have a temporary or permanent contract. It's important to think ahead since a mortgage is a long-term commitment.
• Other income and debts: To determine the maximum mortgage based on income, it's important to analyze the income and expenses you have. For example, in addition to your salary, you may also receive a widow's pension or rental income from another property, which will increase your net income and allow you to allocate more money to the purchase of the property. The same applies in the opposite case, where you have additional debts, dependents, or high medical expenses that require you to allocate more money than usual to their payment.
What house can I afford? Discover it with our mortgage calculator
In broad terms, the key to know what house you can afford is to have a clear understanding of the following aspects:
• The monthly installments should not exceed 30% to 35% of your net monthly income, to be able to afford the payments.
• You should have savings of around 35% of the property price, with 20% to cover the portion of the property price that is not financed by the institution (the financing amount usually doesn't exceed 80% of the appraisal or purchase price), and another 15% to cover expenses.
But if all these percentages and formulas overwhelm you, don't worry! At UCI Mortgages, we offer a very useful tool to discover what property you can afford in Spain. It's our online mortgage calculator.