Borrowing Limits Examples

Example: A single person with annual income of €50,000, would qualify for a mortgage in the region of €175,000 (3.5 times gross income) over 30 years.

Gross income €45,000

Net Income per month €2,900

€175,000 mortgage stress tested at 6% costs €1,050 per month ( stress test to take account of possible rate increases,)

Lenders have a number of rules when it come sto net income.

First rule. Mortgage service ratio MSR

If your income is between €50,000 and €70,000 the amount of your net income allowed for loan repayments used to be as as high as 46%.-- so €2900* 46% = 1334 . Under new lending rules this figure to drop to 36% by virtue if the new limits.

Under new rules the position will be as follows

Net income €2,900.

Max mortgage €175,000 - stress test €1050 per month.

Income remaining after stress test mortgage €1,750

Living expenses € €1,500

Left over €250 per month.

Under the old regime nothing would have been left over.

In this example the amount left over

Food and household €500
Clothes €100
Entertainment €150
Transport €200
Medical €70
Holiday average €100
Gas heat phone tv €120
Contingency savings etc €150
Insurance /pension mortgage protection /other charges €110
Total1,500