In theory, as part of a rental investment, a bank wants you not to exceed 35% debt ratio when you consult them for a rental investment. If you are below this threshold, your application should be accepted and you will be able to leverage competition among banks. If you are above this threshold, don't panic! Remember that mortgages are a fundamental source of new clients for banks, who are just waiting to be convinced to make an exception for you if they sense that you would be a good client for them. As a reminder, the debt ratio is calculated as follows:
Debt ratio = expected monthly repayments / (employment income + 75% of expected rental income - monthly current expenses)
If your debt-to-income ratio is higher than 35% and you have available savings.
Several strategies are available to you:
Make a contribution
Reduce your monthly ongoing expenses (during the 3 months leading up to your request to the bank)
Convince the bank to bet on you. Remember that a bank will make very little money on your mortgage credit and that it wants to make you a client for its other much more profitable products (financial investments). By showing that you are an ambitious person who plans to generate significant income, you allow it to envision a fruitful common future! Yes, an interview at the bank is not so different from a job interview! Bankers are not robots but humans; they will be responsive to your arguments if they are valid and may bend the theoretical rules.
If this is greater than 35% and you do not have available savings
Several strategies are also available to you:
Defer your investment and set aside some money
Look for another high-yield investment that will bring you below 35%
Again, you will need to use your persuasion skills to convince{
The remaining living strategy
Another strategy, bolder but effective in many cases, is to draw your bank's attention to another calculation method: the remaining amount to live on. This allows, instead of focusing on a debt ratio, to concentrate on the money you have left at the end of the month:
Remaining amount to live on = Income from work + 75% of rental income - current expenses - expected repayment monthly installments
If this is greater than €1,000, then some banks will not hesitate to lend to you. Furthermore, note that some banks systematically prefer this calculation method.
Rely on a guarantor
A final strategy, for those who are on the edge in terms of disposable income and debt ratio, is to rely on a wealthier guarantor (often a parent) whom the bank will rely on if you were unable to repay your loan installments. If someone agrees, plan to give them a nice Christmas gift to thank them! Finally, an important piece of advice is to remember to approach many different banks. They do not all have the same borrowing conditions, nor the same loan amounts to unlock. Consider consulting several and do not hesitate to leverage competition! You certainly need them, but a bank cannot survive without clients! Be aware of your strengths and weaknesses in the negotiation.
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