Can I get a credit loan to increase my affordability?
Whether you are eligible for a credit loan depends primarily on your income. A general rule of thumb is that your total loan amount can go up to approximately 100 x your net income.
It’s important to note, that if you are eligible for an additional credit loan to, for example, cover the purchase fees that this credit loan comes at significantly less favourable interest rates. Credit loans are not secured by the property and hence much riskier for the lender and in turn more expensive for you.
Your household has a net income of 6.000 €. You want to buy a property of 450.000 € buy only have 20.000 € in savings. Given 10% purchase fees, you are required to cover 45.000 € with your savings. In this case, just to buy this property you would need to take out a credit loan of 25.000 €, which may mean your monthly payments look like this:
((Loan amount * (interest rate + repayment rate)) + Credit amount * (interest rate + repayment rate)) / 12 months
( ( 450.000 € * ( 1,00 % + 2,00 % ) ) + ( 25.000 € * ( 5,00 % + 5,00 % ) ) ) / 12 months
= ( 13.500 € + 2.500 € ) / 12
= 1.333 €
As you can see, in some cases it can make sense to get a credit loan, for example, if you do not have enough savings to get the property of your dreams that you can keep for a longer period of time. Given the high purchasing fees, it's important that you do not move too early as you would have to pay these high fixed costs again.
Hence, if getting a credit loan means unlocking a larger property and not having to move, it can make sense if you can afford it.
