Mortgage border up again

Again the limit for an NHG mortgage is going up. In 2018, a mortgage with a guarantee can be taken out for a home up to 265,000 euros.

Limit for NHG mortgage in 2018

Limit for NHG mortgage in 2018

If you buy a house up to 265,000 euros in 2018, you are eligible for a National Mortgage Guarantee (NHG) mortgage. This increases the cost limit for the guarantee by 8%. This year an NHG mortgage can be taken out for a home of 245,000 euros.

For an investment in energy-saving measures, more than 15,000 euros can be borrowed under NHG next year. The cost limit then comes to 280,900. This has been announced by the Home Ownership Guarantee Fund, which is behind the NHG.

Note: With an NHG mortgage, 6% additional costs are taken into account as standard. The maximum mortgage under NHG is therefore lower.

More buyers eligible for National Mortgage Guarantee

More buyers eligible for National Mortgage Guarantee

The increase in the NHG limit is a response to the increased house price. The guarantee fund behind the National Mortgage Guarantee wants to continue to offer starters the opportunity to finance their first home “in a responsible manner”.

Just as starters are under pressure from the heated housing market, less housing allowance can be financed under NHG. The number of homes that are eligible for the guarantee has fallen from 90% in 2012 to below 70%.

The National Mortgage Guarantee offers a safety net

The National Mortgage Guarantee offers a safety net

The National Mortgage Guarantee offers a safety net if things go wrong, for example in the event of work disability, unemployment or divorce. The guarantee fund offers help with payment problems and can, under conditions, cancel the remaining debt.  mortgage with a guarantee can be taken out for a home up to 265,000 euros.

Starters who buy their first home above the asking price and that finance it to the maximum, run a higher risk.

What does your debt ratio say about you? | Debt Consolidation

We regularly hear about the debt ratio (also known as “debt ratio” or “debt level”) in the media (here, here and here again). It is indeed an important financial indicator to know the financial health of an individual or a company. An explanation over at http://wonderfactory.org

A bank, a financial institution, a lender, an investor or other will certainly want to know your debt ratio before you give more credit. This is normal because this indicator makes it possible to judge if you will be able to respect your monthly payments taking into account your income.

How to calculate your debt ratio?

How to calculate your debt ratio?

The calculation of the debt ratio is relatively simple. It is a question of adding all his income (work income, pensions, investment income, rent income, etc.) and dividing it by the sum of his recurring monthly payments (car payment, rent or mortgage). insurance, taxes, municipal and school taxes, payments on debts, etc.).

The result of this calculation gives a figure that can be expressed as a percentage, which is your debt ratio.

It is important to note that expenses not arising from “debts” in the broad sense are not counted in monthly payments. Thus, grocery, restaurant, telephone / internet / cable, electricity (Hydro-Québec), gasoline, recreation, etc. expenses will not be counted.

What is a “good debt ratio”

What is a "good debt ratio"

Beyond the calculation of the debt ratio, one must understand what the result means. In all cases, a low debt ratio is preferable. However, one should not worry if it is below 30% .

  • 0 to 30%: Excellent
  • 30 to 35%: Acceptable
  • 35 to 40%: At risk
  • More than 40%: Danger

If your debt ratio is above 40% , your situation is considered critical and you will have a hard time getting new credit. In addition, for your own financial health, you should stay away from such a high level of debt so that you have enough money for your savings and essential expenses like groceries, gas and some Hobbies.

How to reduce the level of debt?

How to reduce the level of debt?

If your debt ratio is critical and you want to lower it, there are no miracle recipes. You must either (1) increase your income and / or (2) reduce your monthly recurring payments.

To increase your income, you might consider getting a salary increase, changing jobs or finding a second source of income. This option is far from easy for everyone and may not solve the real underlying problem, the lack of control over your expenses.

So, you can turn to the second solution, which is to reduce your monthly payments. To do this, the very first thing to do is to stop buying on credit. Whether it’s your furniture, appliances, travel, renovations or anything else, these are expenses that should be paid in cash. This kind of spending is frequently the reason behind a high level of debt.

Then, review your budget and make sure to respect certain ratios for your expenses in housing and transport. Your home should not cost you more than 25 to 35% of your disposable income and you should not exceed 15% for your transportation expenses (car, gas, maintenance, insurance, etc.).

Of course, you can adjust these numbers if you are willing to make some concessions elsewhere in your budget. However, remember that it is the recurring monthly payments that count in the calculation. So, if you cut food for the benefit of your home, it will negatively affect your debt ratio even if in total, your expenses are equal.

What if my financial problems affect my debt ratio?

cash

If over the years you have accumulated a large amount of debt and you realize that a large part of your budget is confined to the payment of these debts, solutions are available to you.

First, you can turn to your financial institution and ask for debt consolidation. Debt consolidation will consolidate all your debts into one monthly payment.

This one-time payment is advantageous because the interest rate is generally lower. However, it is possible that your institution refuses you such a loan, precisely because of your high debt ratio which puts off them. If this is the case, a trustee in bankruptcy can offer you other solutions such as the consumer proposal.

The consumer proposal is similar to debt consolidation, but it also reduces the total amount of debt in addition to completely freezing interest. This is a statutory mechanism administered by a trustee to provide you with legal protection. This solution negatively affects the credit record but allows you to get out of the debt cycle once and for all.