Many expats in Belgium, especially those on long-term postings, consider buying a home. Unless you are in the fortunate position of having a pile of cash, it’s useful to calculate how much you can afford to borrow before starting to look at properties.
Here are the key factors to take into account when considering how much you can borrow.
The full purchase price of a property refers to the amount you are paying for the property itself, plus an additional 11-21% to cover all required extra costs (depending on the region and whether it is new).
A down payment is the percentage of the full purchase price you are able to pay with your own money. Belgian banks will typically require a down payment of at least 10% of the full purchase price.
The term of a mortgage is the number of years in which you pay back what you borrowed plus interest; most lenders offer options from 10 to 30 years. The length of the term has the largest effect on the amount you will need to pay back each month.
There are two principal types of mortgage: a fixed rate mortgage and a variable rate mortgage. With a fixed rate mortgage, the interest rate stays at a set percentage for the full term. With a variable rate mortgage, the interest rate will be automatically adjusted at set intervals throughout the term. Belgium is unusual compared to many other countries in that variable rate mortgages have options to set revisions annually, every 5 or 10 years. Your choice affects the interest rate you start with.
A fixed rate mortgage offers stability as your payments will remain the same for the whole term. A variable rate has a lower rate of interest (significantly lower for longer mortgages), but can go up if interest rates increase (or down if they decrease). You need to make a decision based on your personal circumstances, get advice if you need it.
You need to consider how much you can afford to pay back each month, a lender will be looking to see repayments at or below 35% of your monthly income.
A mortgage calculator can help you weigh up all these factors, enabling you to get started with your house hunting. BNP Paribas Fortis offer an online mortgage calculator that can help you start crunching the numbers and determine how much you can borrow.
This article has been published in cooperation with BNP Paribas Fortis; the bank for expats .