MORTGAGE APPROVAL: HOW TO CALCULATE THE ALLOWABLE MORTGAGE PAYMENT?

Calculating the maximum allowable mortgage payment is a key step when preparing to purchase real estate with a loan. To avoid finding yourself in a situation of financial vulnerability, financial experts recommend approaching this issue comprehensively and calculating several possible scenarios for the development of events.

First of all, you need to calculate the baseline scenario of your current income and expenses. To do this, collect all official and unofficial sources of income for the past six months and subtract mandatory expenses from them, including utility bills, transport, grocery shopping, loans, and the maintenance of dependents. The resulting amount will be your starting point, but you must categorically not give it entirely to the bank.

The second important step is to set aside a mandatory financial reserve of 10–20 percent of your net balance. Life is unpredictable, and unforeseen circumstances may arise in the future, such as temporary job loss, health problems, or the need for urgent car repairs, so an emergency fund is mandatory.

Also, be sure to calculate a stress scenario in case of a deterioration in the financial situation. For example, what will happen if the main source of income decreases by a third or one of the co-borrowers temporarily stops working. Make a clear plan in advance and decide which specific expenses or monthly payments you will reduce or cancel first in order to maintain the ability to make your mortgage payment on time.

After completing all these calculations, you will get a realistic monthly payment amount that will not cause constant stress and will allow you to comfortably service the mortgage loan for the entire duration of the agreement.