Home loan calculator: How much can you afford to buy?

Would you like to know how much you can afford to buy a home for?

When you want to know how much you can afford, the bank primarily assesses your disposable income (rådighedsbeløb), your debt and your down payment. Today, rules of thumb like 3.5 × income are secondary. With the right financial advice and negotiation, your real home budget can often be higher than the bank's first answer.

How large a disposable income does the bank require? The bank assesses your home purchase based on your disposable income — that is, the money you have left each month after fixed expenses. Today, disposable income is more important than the debt-to-income factor (gældsfaktor) and income multiples. You typically need to be able to document that you can live with the lower disposable income for at least 3 months.

How much can I afford to buy a home for? Your home budget primarily depends on your disposable income, your debt and your down payment — not fixed rules of thumb. The bank requires at least 5% in down payment and focuses in particular on whether your finances can carry the home on a monthly basis. With professional negotiation, many people can afford to buy a home for more than the bank's initial assessment.

Get an overview of your loan options. Dreaming of buying a home but unsure how much you can borrow? With Bomae's home loan calculator, you quickly get an overview of your loan options and see precisely how much you can afford to buy a home for. Our calculator takes your income, assets and debt into account, giving you a realistic picture of your home budget.

At Bomae we go a step further than an ordinary loan calculator. We help you obtain and negotiate the best possible loan terms, so you can save both time and money on your home purchase.

Get a precise overview of your loan situation

• Calculate how much you can afford to buy a home for based on your finances
• See how your debt-to-income factor affects your loan options
• Compare different financing options
• Get insight into potential savings through professional negotiation

How much can I borrow for a home? When buying a home, you can generally borrow up to 95% of the home's value, provided you can pay at least 5% as a down payment yourself. The loan is typically made up of a mortgage loan (realkreditlån) and possibly a bank loan, where interest rates and terms vary.

You can finance a maximum of 80% of the home's value with a mortgage loan, while the remaining portion is normally covered by a bank loan. Since the interest rate on mortgage loans is usually lower, it's recommended to place the largest share of the financing there, when your finances allow it.

A loan calculator can give you a realistic overview of your options, but the final loan amount depends on your overall finances, including disposable income, debt and choice of loan types.

How large a down payment do you need when buying a home? As a starting point, you need to be able to pay at least 5% of the home's price in cash. This is the minimum requirement from the Danish FSA (Finanstilsynet) and is therefore often the figure shown in sales listings.

In practice, the down payment requirement can be higher. Many banks require 10%, 20% or more, depending on your finances, your debt and how robust your disposable income is after the purchase.

It's important to remember that buying a home isn't just about the purchase price. Interest, contributions and other housing costs also need to fit within your everyday budget. A price reduction on the home can therefore have a major impact on both the down payment, the loan and monthly costs, and this is where professional buyer advisory support can help in the negotiation.

Is 3.5 × income a reliable rule? No. The rule of thumb that you can borrow up to 3.5 times your pre-tax income is today used only as a rough guideline. Banks don't assess creditworthiness for a home purchase based on a single fixed multiple.

In practice, the bank assesses several metrics, including the debt-to-income factor (gældsfaktor), which is calculated by dividing the household's total debt by the household's annual pre-tax income.

The debt-to-income factor still plays a role in the assessment, but it has become less important than before. Today, disposable income is the decisive factor. This is the money you have left each month once all fixed expenses and housing costs have been paid, and it's this figure the bank uses to assess whether your finances can support the home purchase.

How much disposable income should you have when buying a home? When the bank assesses how much you can borrow for your home purchase, they look at, among other things, your disposable income. Disposable income is the money you have left once all fixed expenses have been paid.

There's typically a drop in disposable income associated with buying a home, because most people end up paying more than they do in their current home.

The difference between your current and future housing costs corresponds to the drop in disposable income.

Before the bank can approve you for credit on a home purchase, the requirement will typically be that you can document that you've saved up the difference over a period of usually at least 3 months.

Help with home loans: How much can I borrow? There are an enormous number of aspects to consider when looking at homes, and loan terms vary a lot from buyer to buyer. At Bomae we have the most skilled financial advisors, who know everything about the loan market, how banks work, and much more.

Many people see the bank's loan certificate (lånebevis) as the final word on how much you and your family can afford to buy a home for. But it doesn't have to be that way. There are so many factors involved in buying and living in a home that the loan certificate doesn't have to be a barrier to going after your dream home — even if it's several hundred thousand kroner above what the loan certificate states.

Here's how it usually works today:

Let's take an example: A family with two children has fallen in love with their dream home. A beautiful house, the right floor plan and a perfect location. Price: 4.6 million kroner.

The family then goes to their bank to finance the purchase. Here the bank takes into account the family's household income, current disposable income and a standard mortgage type. The family is assessed as being able to afford a home for 4.2 million kroner — 400,000 kroner below the asking price.

Many home buyers have found themselves in this situation, where they have to give up their dream home and instead compromise on location, the home itself, the garden or the home's condition.

Here's how it should work:

If the bank focuses solely on the purchase price of your home, there's a risk of overlooking the most important financial aspect of the purchase — namely, what it costs on an ongoing basis to live in the home. In some cases a more expensive home can actually be cheaper to live in. If it's in better condition, has a new roof, a dry basement, or brings down the family's transportation costs, then those are factors that should be taken into account.

At Bomae we've therefore specialized in both home advisory services and financial advice, fully approved by the Danish FSA. We assess your entire family's overall finances in relation to the home or homes you have on your radar. This means we can contact multiple banks and mortgage lenders with detailed calculations and negotiate both loan terms and loan certificates in a way that a private individual would rarely be able to.

You can read more about how a loan advisor at Bomae can help you negotiate your upcoming home loan.

In short: Your dream home may still be within reach, and you don't always get the very best and cheapest home loan from the bank on the first try. That's why you need to make sure you get exactly the right loan advice. You should also obtain several different offers from different banks.

Here you can get more good advice on how to get the best home loan at the bank.

Do you also find home financing overwhelming, and are you worried about not securing the best loan terms? Then get help with your home loan from a financial advisor at Bomae.

Fill out the contact form so we can talk about how we can help you buy and finance your home.