by Andreas Kokkinos
Housing credit is a problem that inevitably affects a large number of young couples. Because housing prices have soared while wages have remained stagnant, the need for housing drives borrowing. Borrowing is almost a necessity for the majority of young couples who cannot afford to buy an apartment or a house without borrowing. But how much money can you get? How does the bank know that you will repay the loan? How are payments determined? Apart from your income, what other factors are taken into account by the bank?
The financial details of the client on paper, such as the amount requested, his net salary – in total when he is in a relationship – and his living expenses, are included in the procedural part. These are supplemented by social charges and property tax. According to Central Bank guidelines and for the purpose of calculating net income, a husband and wife have monthly living expenses of approximately EUR 1120, followed by EUR 220 for each child under 15 and EUR 370 for each child between the ages of 15 and 18. Banks can add a percentage of 10-20% to the amount set by the Central Bank as a “buoy” for living expenses. It should also be noted that if the amount declared by the candidate borrower for living expenses exceeds 1120 euros, the bank will automatically take this amount into account.
It is estimated that a husband and wife have monthly living expenses of around EUR 1120, plus an amount of EUR 220 for each child up to the age of 15 and EUR 370 for each child aged from 15 to 18 years old.
Candidates are tested
Following the submission of financial data, the banking institution investigates the potential borrower. In other words, a bank employee checks each customer’s identity number with the ARTEMIS system to identify any credit facilities he may have with other banks. For the purposes of verification, loans from other banks are taken into account, as well as any late payments and whether the applicant is a guarantor of another loan. Overdrafts and credit cards are also studied.
How the payout is calculated
The couple’s salaries are then added (for example, 1000 + 1000 euros), and living expenses and credit facilities are deducted from the total as previously indicated. It is estimated that about 80% of the amount resulting from the deduction can be used in the form of a monthly payment. That is, after deducting 1,120 (as living expenses) and 280 (as credit facilities) from €2,000, an amount close to €600 remains. The couple can then afford a down payment of around €480 on this total. According to banking circles, establishments also carry out certain “stress scenarios”, or hazards which can weigh on the financial situation of the candidate. Examples given include a 15% increase in down payment or a 20% reduction in income and wages, but there are many others. If the DSR (Depth Service Amount), calculated by dividing the payment by the number of surpluses, exceeds 80%, the potential borrower is automatically rejected by law.
Can a couple with 2,000 income take out a 200,000 loan?
In these cases, it is particularly important that the bank considers both the level of education (according to the diploma, the master’s degree, whether it can be used to find a job directly in the event of unemployment, the opportunities) and the style or if you prefer job stability. A person working in the public sector (government) has an advantage because of stability, whereas lawyers and accountants provide “security” in banking institutions. Candidates whose income is based on commission, on the other hand, are considered high risk.
To sum up, for a couple looking to buy a house or an apartment with a loan of €200,000, the monthly payment is around €700, with a maximum repayment term of 35 years. This assumes that the borrower does not reach the age of 65 during the 35-year period, as this is the maximum age covered by life insurance. To respond to the initial scenario, a young couple with €2,000 in income, no children, no other or unpaid payments can benefit from a loan of up to €200,000, and it is all the more useful since in most banks, you can calculate the payment online according to the amount borrowed using a calculator on their websites. Finally, it was reported that the majority of loans are between $150,000 and $200,000, with nearly 80% of applicants being approved.
[This article was translated from its Greek original]