Before you decide on a mortgage, you must analyze your creditworthiness, which is one of the key determinants of the amount of credit that we can receive. What is creditworthiness, how to improve it and what other sources of income besides fixed income can help build it?
Creditworthiness is nothing more than the ability to repay debt
On the agreed date. On this basis, the bank determines the amount it borrows. Each such institution has its own rules for which it lends money. Therefore, the inability to grant a loan in a certain amount in one bank does not mean the same in a competitive bank.
The income that is the basis for calculating creditworthiness is not only remuneration for full-time work , but also other sources of financing that help us to survive. Which of them does the bank consider when it examines our potential repayment capacity?
Other sources of income affecting creditworthiness
- income from business operations – banks require it to be conducted for a minimum of 12 months. Apart from income, their regularity and the chosen form of taxation influence the possibility of obtaining a loan on their basis;
- agricultural income – yes, but not by all banks. Some require that such activities be conducted in the form of economic activities;
- funds under a specific task or mandate contract – the bank recognizes them if we can document such income for at least 12 months;
- income from function or appointment, e.g. as a member of the management board – members of the management board may include in the application information about additional income obtained as part of performing a given function;
- Revenues from copyright – a creator who carries out his activities on a continuous basis and for a gain may be qualified as a self-employed person. Therefore, as part of its business, it may include income from copyright;
- rental and lease income – banks recognize this form of income provided that the lease has been carried out for at least 12 months, and its fact has been reported to the Tax Office and we pay income tax contributions under this agreement (lump sum, on general principles or through business activity);
- dividend – this is part of the company’s profit, paid to share holders. The dividend is paid when the company has achieved a positive financial result. Such a solution may improve and affect creditworthiness;
- permanent disability pension or old-age pension – here the key factor will be its amount and the period for which we want to take a loan, remembering that the maximum repayment time is the age at which we reach 65-70 years depending on the bank;
- contracts, e.g. seafarers (special type of employment contract for offshore civilians)
- financial income from capital investments;
- bonuses and overtime – this income is usually already included as part of our full-time salary
- maternity allowance
- income from abroad, e.g. in the form of a contract – in a situation where one of the co-borrowers receives their part of the remuneration in currency and this is not the only income in the family. Only some banks accept this form of income.
What other sources of income are not accepted by banks?
- Parental benefits
In order to improve your creditworthiness, it is worth considering early limitation of liabilities or extending their loan duration, so that the amount of monthly liabilities is lower.
Not all banks honor all of the aforementioned income, so you should use the help of a financial expert who will allow us to assess your creditworthiness and tell us the best solutions.