How much can I borrow with net monthly earnings of $ 5,000?

You want to borrow with a salary of 5,000 USD net monthly? To validate your real estate purchase project, you will need to calculate your debt capacity, which is the amount you can borrow according to your income.

Do you plan to take out a mortgage to finance your purchase? How much can one borrow with income of 5,000 USD net monthly? Answer and explanations.

How to determine your borrowing capacity?

How to determine your borrowing capacity?

The ability to borrow helps determine the financial effort you can afford and the amount you can borrow. In concrete terms, the lending institution will evaluate your file and your financial situation taking into account several factors such as your debt ratio, your remaining life and your personal contribution.

The maximum debt ratio is set at 30% or even 35% of annual resources. Beyond that, the borrower is exposed to the risk of over-indebtedness. For example, if your monthly net income is $ 5,000 and your monthly loan charge is $ 1,000, your debt ratio is 20%. To achieve this result, use the following formula: (1000 X 100) / 5000.

The rest to live is also decisive . It corresponds to the resources available to the home after honoring the mortgage payment monthly. These resources must be used to pay for daily expenses and deal with unexpected events. The remaining living is calculated taking into account all household income and expenses. Credit institutions generally admit that this amount is equal to 800 USD for a single person or 1200 USD for a couple without children.

Finally, personal contribution is important because it can allow you to borrow a larger amount. A contribution of at least 10% is ideal but not essential to subscribe a mortgage.

Example of a loan with a salary of 5,000 USD net monthly

Example of a loan with a salary of 5,000 USD net monthly

The following table takes into account additional costs such as borrower insurance or the interest rate.

Duration of credit

Maximum sum

15 years

268 100 USD

20 years

USD 338,600

25 years

USD 396,500

Thus, with a salary of 5,000 USD net monthly, you can expect to borrow 268,100 USD over 15 years, 338,600 USD over 20 years or 396,500 USD over 25 years. These amounts may however vary according to your projects: 1st real estate purchase, rental investment, purchase of a second home …

Simulate your mortgage

Simulate your mortgage

It is possible to obtain a more accurate simulation using an online tool or by using a broker. All you need to do is fill out a free form with several information about your professional and financial situation. The result is displayed in minutes and allows you to evaluate the feasibility of your project.

After determining the amount of your future monthly payment through the online mortgage simulator, you can use a credit comparison tool to find the best deal. This tool only displays offers matching your criteria which saves you valuable time and money. Once you have selected the offer, make sure you submit a complete file to the lender so you do not waste time or delay your project. A broker can assist you in this process.