Calculation of the Debt Ratio
Simulation with the calculator
To calculate your debt ratio in just a few seconds, you only need to enter in the first field your annual net income and in the second the monthly installments of current credits . Specify if you own or rent, that’s all.
The data entered must only contain numerical values!
Annual net revenue
Current monthly payments (M1 + M2 + ..)
Are you the owners? Yes no ________________________________________________________________________________________
You must take into account all of your net annual income. For example, your monthly net salary multiplied by 12, plus any bonuses (13th month, holiday bonus …). Add ancillary income such as alimony or rents collected in the year.
Be aware that banks rarely exceed a debt ratio of 33%, even if the risk analysis is global and covers other elements such as the ” remainder to live “, that is to say the sum remaining in once paid the different monthly payments, the professional stability or the good performance of the bank accounts.
Do not count all your income
The calculation of the debt ratio takes into account only the certain incomes of co-borrowers. For example, 13th month bonuses or holiday bonuses are taken into account and considered as remuneration. On the other hand, incentive or participation bonuses are not included in the calculation due to their random nature, even though their payment has been recurrent for several years.
For housing assistance ( APL , housing allowance) or family allowances, be aware that banks sometimes weight their amount according to the age of children or the situation of borrowers.
More generally, she wants to make sure before accepting to finance your project, that your income will be paid regularly during the loan period. Although there is no guarantee that you will keep your current employment situation and that your income will remain stable, it seeks to minimize the risks of departure and to ensure that you are able to meet the monthly payments .
Example calculation of the debt ratio
Let’s take a simple example with a couple of borrowers whose annual professional income net of expenses amount to € 35,000. Mr. receives in addition to a premium of thirteenth month and Madam of a bonus of profit which varies according to the years of 1200 to 1800 €. The couple has two children aged 2 and 4. They therefore receive a monthly APL of 128 €.
They also refund a car loan that will end in three months and for which they repay 150 € monthly.
They want to buy their home. For this, the bank’s financing plan proposes a repayment schedule of € 850 per month.
All income is taken into account with the exception of the incentive bonus because of its randomness. The 13th month will however be counted.
Amount of net income: € 35,000 + € 2,500 + (128 * 12) = € 39,036
Results of the calculation of the household debt ratio :
- Before realization of the real estate project: (150 * 12 * 100) / 39 036 € = 4,6%
- After purchase of housing: ((150 * 12) + 850) = 30.74%
This is a folder that will not pose a problem. On the one hand the debt ratio is lower than 33% and on the other hand, the rest to live is enough for a couple with 2 children. If the couple has more than a personal contribution, it will even be in force to negotiate the best rate conditions, because the file will interest the bank.
Regarding the consumption loan, it could almost not appear in the calculation due to the low remaining time. In fact, at this stage, it is necessary to take into account the time needed to release the loan, ie about three months. The couple will no longer repay the car loan when the mortgage will be released. In any case, given the small capital left over, it could easily be repaid.