Here are some tips for people who want to buy a home. We will talk about the effective use of credit products offered by banks. So let’s see how to properly manage each type of credit.
Loans for the purchase of a home represent in Romania about 60% of the total loans granted to households by the entire banking sector.
The most common loans are:
- mortgage loans where the purchased or built building guarantees the contracted loan
- real estate loans where any property can be used as collateral even if they are not subject to financing
The mistake of mortgages is that most people walk into the bank and ask, “What is the maximum credit I fall into?”
FUNDAMENTALLY the question is wrong!
First we should ask ourselves: “What is the maximum value of housing I can afford, considering the family income?”
THE ANSWER IS AS FOLLOWS:
From A = Family Income X 12 months X 5 years
We subtract the reserve (required for contingencies or higher expenses)
10 % from A – if the house is bought from own funds
20% from A – if a loan is contracted
|Family income/month €||Family income/year €||Family income/5years €||Own funds €||Loan €|
|1 000||12 000||60 000||54 000||48 000|
|1 400||16 800||84 000||75 600||67 200|
|2 000||24 000||120 000||108 000||96 000|
|2 500||30 000||150 000||135 000||126 000|
Some rules to consider:
• consider only stable income that you know you can rely on in the long run; Do not consider temporary bonuses, parents’ pension or sale of assets!
• the reserve can reach 30% or even 40% when there are large expenses (a family with more than 2 children, health problems, a riskier job or income that fluctuates strongly every year)
“How much can I afford?” is a question that every wise buyer raises responsibly. We also ask ourselves this question when buying clothes, shoes, a holiday, a car; Why not ask ourselves the same question when we make perhaps the most important purchase of our lives, buying a home.
An example: a young person who is 20 years old, is at the beginning of his career and earns 1000 € monthly, can think about buying a home worth 54 000 €. Being ambitious, he wants to buy the house from his own funds. So he thinks that in 20 years, at the age of 40, he will settle down at his house. Can it? What savings do they need to make? The answer is simple:
54 000 € : 20 years = € 2 700 (money saved per year)
2 700 € : 12 months = 225 € (money saved per month)
1 000 € – 225 € = 775 € (money available every month)
Try to make such calculations to achieve your goals!