How are banks currently deciding the max mortgage you can have?

T

TheJackal

Registered User
Messages
379
I'm wondering what the current test is that banks are using to determine the max mortgage they can loan you.

Is it a multiple of your salary?

Or purely ability to meet monthly repayments via stress testing of say 6%?

Or some version of both?

I prefer the stress test route. For example, if I wished to borrow 300K over 30 years, at the 6% stress test rate my monthly repayments are €1,800, which I could meet.

But if it's say max of 5 times your salary, I couldn't get 300K.
 
Repayment capacity is the first test i.e proving you can cover the stress tested mortgage repayments through current rent and/or savings.

The second test is net disposable income (NDI) , it's all well and good proving you can afford the repayments but if the repayments are a large percentage of your net disposable income then you will fail this test. You need to have enough money after paying the mortgage to comfortably live on.

The higher your salary the higher percentage of NDI the banks will allow you to use.

[broken link removed]
 

Makes sense.

What's the current stress test percent?

And precentage of net disposable income after stressed repayments you should have to live off?
 
There is no set figure but use 6% and you'll be safe.

NDI depends on how much you earn and the lender.

Rough guide :
If you earn
<30k : mortgage repayments should not account for >30% of salary
<40k : >35%,
<50k : >40%
 
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