The need for housing leads either to borrowing or renting, but both options are costly affairs.
The majority of young couples do not have the financial capability to buy without resorting to borrowing and without having a sum set aside, as banks do not finance 100% of the property value but only 70% or 80% depending on the bank and the category of the potential borrower.
However, the question is how much can someone borrow if their average salary is €1,300 to €1,500, or if the average family income is up to €2,500, and they will have to commit to debt for the next 30 or 35 years.
The first and foremost thing is that by depositing the financial details of the borrower, there is an investigation by the banking institution regarding the potential client.
It is considered an advantage if the potential client works in the broader public sector due to stability, while on the contrary, candidates whose income comes from the private sector or is unstable are considered high-risk.
The responsible bank employee checks each client through the ARTEMIS system with their ID number to identify any credit facilities they might have with other credit institutions, such as loans, and if these are being serviced regularly.
Credit cards and overdrafts that the potential borrower may have are also checked.
When assessing the applicant’s repayment ability, the total debt servicing amount must be limited to 80% of the net available income.
Net available income is calculated as the difference between total monthly income and total monthly expenses.
If the loan duration extends beyond the borrower’s expected retirement age, the credit institution must consider the adequacy of the borrower’s potential incomes and their ability to continue meeting their loan obligations after retirement. If loan instalments gradually increase, then the credit institution must evaluate the repayment ability in relation to the corresponding estimated future incomes.
Moreover, credit institutions must assess whether the net available income is reasonable. If a couple applies for a housing loan, and both their monthly incomes are €2,500, the first thing done is to subtract the monthly living expenses.
Source: Philenews