Hi
@RedOnion. Can you explain with an example how that is the case? I'm struggling to see it.
Hi Paul,
We're used to talking about mortgage maximums as a multiple of salary. But that's just CBI maximum. The actual maximum is based on stress tested repayments, and the amount of money you'd be left with after mortgage payments. This has a larger weighting here if the OP wants to keep a short term like 15 years.
The criteria would be to have 2,300 for couple (plus 200 to 250 for each additional child) of your net monthly income left over after paying mortgage and any other loans.
14k mortgage over 15 years at 4% is roughly 100 per month. So each 100 euro per month has than much impact. It's actually less than 14k as it's base don stressed rates (+2%). This is why having other commitments, like car loans, has such an impact on the amount you can borrow with a mortgage.
@Susie34
Firstly, under CBI rules, the maximum you can borrow is 3.5 times income. So max 290,500.
But over 15 years you wouldn't be able to borrow that much as banks will assess that you cannot afford the repayments.
Roughly speaking (each lender has different criteria, and they are constantly being tweaked), to demonstrate affordability a couple with 3 children need to be able to have 3,000 per month left after paying mortgage and other commitments. The mortgage payments are stressed by assuming a 2% increase in interest rates. Assuming you've no other loans / car finance in place:
Over 15 years, you could borrow c. 240k. Repayments at 3.5% would be 1715 per month
But, you could apply to borrow over 20 years, or 25 if your age allows, to meet the affordability criteria, and then just repay the mortgage faster.
Over 20 years, borrowing 290,500 repayments would be 1684 per month at 3.5%
Any mortgage will be on condition that current house is sold.