Debt service rate to buy a home!

Buying a house is one of the big decisions that a person has to make: due to its importance and value, both emotionally and financially. Most of the time, buying a home involves asking for a bank loan, but is it enough to just ask? It is at this moment that we must study some financial concepts and the loan debt service rate is one of them, as it is a very decisive element for the granting of housing credit.

Banks are increasingly selective when it comes to granting credit, so they need their customers to have documents proving their ability to pay. And it is exactly to measure this capacity that we must calculate this rate. Basically, the debt service rate is the percentage of the total household income that is used to pay the credit instalments and is calculated as follows:

Calculation formula for effort rate

It is advisable that this rate does not exceed 33%, although certain financial institutions accept slightly higher limits. All these calculations are particularly important, because in addition to housing credit, there are other fixed expenses that cannot be neglected and that must be met. In our article Monthly Budget: how to do it we have already explored the importance of knowing where your money is being spent.

Nowadays, there are several online simulators where it is possible to calculate your debt service rate. However, there is essential information to obtain the most realistic value.

In terms of income, it is necessary to provide data such as:

  • Net monthly income
  • Income from rent
  • Pensions
  • Other fixed monthly earnings

As for expenses:

  • Mortgage loans
  • Car credit
  • Personal credit
  • Credit Card Debt
  • Other credits

You should only need to fill in the items that apply to your case! After the calculations are made, you will see if your debt rate is reduced (up to + -19%), intermediate (up to 33%) or above the recommended limit (> 33%). If the latter is your case, you should re-valuate your expenses and try to renegotiate the credit with your bank.


So, if you are looking for or in the process of buying a home, analyze your accounts well and check your effort rate so that your bank does not hesitate when granting you the credit!

Carolina Carvalho – Management Team