Testimonial

How can people work out how much they will be able to borrow?
- “The amount you’ll be able to borrow depends on your net monthly income, plus any regular bonuses you might be entitled to, profit sharing payments, performance bonuses and family allowances. The monthly repayments should not be higher than 33% of this total income. This figure may vary, depending on your salary level.
Your deposit and any Interest Free Loan (PTZ) you may have* can also be added to your borrowing calculation. Depending on whether or not your Interest Free Loan includes a deferred payment period, it could increase your borrowing capacity by between 10% and 15%.
The amount you can borrow also increases in proportion to the loan repayment period. It ranges from 3.45 times annual income on 15-year loans (excluding subsidised loans) to 4.55 times annual income over 25 years”.

* Loan for the purchase of a main residence (subject to income limits)

> For more information about the Interest Free Loan (PTZ)

Are there any rules that can maximise the chances of success?
- “There are 3 main rules to follow:
- A well-conducted bank account, by which I mean no excessively high overdraft and no refused payments. It’s also a good idea to avoid taking out any car loans or personal loans in the three months leading up to your application
- At least 6 months’ service in your current job
- At least the minimum amount of deposit (see next question)”.

Is it possible to get a reasonable interest rate without a large deposit?
- “The banks have been a lot stricter over lending since the start of last year. They now require a deposit that will cover at least the legal and guarantee fees, which account for 7% of the price when you buy an older property (the legal fees fall to around 2.5% when you buy new), plus a further 5%. Those applicants able to offer a 10%-15% deposit get the best rates. If you can’t manage that, then emphasise positive points like your job and income prospects”.

What are the stages involved in applying for a loan, and how long can it take?
- “There are usually three steps in the loan application process:
- an initial meeting to assess the total amount of borrowing required
- a second meeting to complete the loan application documentation. At this point you’ll have to show your bank statements, tax assessment, marriage certificate, proof of deposit and property reservation contract
- a third meeting to check that the loan offer meets your expectations

Once the loan offer has been issued, the time taken for release of the money varies from bank to bank, but it’s usually between 2 and 4 weeks”.

What is today’s average property loan rate?
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What is the outlook for interest rates in the months ahead?
- “Having risen in 2007, interest rates have fallen slightly since the start of this year, and we expect them to remain unchanged for the rest of the year.
As far as interest rates are concerned, now is a good time to become a homeowner!”

Is it better to borrow during periods of higher inflation?
- “Yes. People who borrow to buy property in periods of sustained higher inflation see the proportion of their expenditure spent on loan repayments fall significantly. Assuming average inflation of 2% over the loan period, the average amount outstanding over 25 years falls from 33% to only 25.8%. The estimated inflation rate for 2008 is 3.5%. Another thing to be taken into account is that when you buy, you no longer have to worry about rising rents, which are indexed against inflation”.