Surely at some point you have been curious to know what is the main factor that determines the amount of the mortgage loan. Is it the level of income you can check, or the value of the property to be acquired? Next you will know the answer to this question.
To better understand how the above factors influence the amount of the loan in question, you must remember how this credit instrument works.
How does a mortgage loan work?
The operation of this instrument is very simple: the financial institution acquires in your name a real estate. Said good works as a guarantee of the fulfillment of your obligations of payment of the credit, through the figure of the mortgage. When you completely cancel the credit, the bank releases the mortgage, and you get full ownership of the property.
On the other hand, in case you do not timely comply with the payment of the credit, the institution executes the mortgage, thereby obtaining full ownership of the asset. With the sale of the same, you can recover the initial investment that meant its acquisition.
What is important when determining the amount: the income or the value of the property?
The answer is that both are equally important, for the reasons set out below.
The value of the property is decisive, since it establishes the amount of money that the institution must invest when acquiring the property. And of course, the value of the good that remains as a guarantee of payment, through the figure of the mortgage.
In fact, banking institutions establish as a cap on the amount of their mortgage loans, 90% of the value of the property to be acquired.
The financial institution wants to make sure that your income level allows you to solve without problems the payment commitment you acquire with the credit. Therefore, your provable income is also decisive when establishing the amount of the mortgage loan.
Financial institutions generally set 40% of your monthly income to the maximum monthly installment of your credit. This indirectly establishes the total amount of credit you can opt for.