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|
|Holiday average €100|
|Gas heat phone tv €120|
|Contingency savings etc €150|
|Insurance /pension mortgage protection /other charges €110|