by Andreas Kokkinos
Housing loans are an issue that inevitably affects a large number of young couples. Because housing prices have skyrocketed while wages have remained stagnant, the need for housing leads to borrowing. Borrowing is almost a necessity for the majority of young couples who cannot afford to buy an apartment or a house without a loan. But how much money can you get? How does the bank know you'll repay the loan? How are the installments determined? Aside from your income, what other factors are considered by the bank?
The process
The client's financial details on paper, such as the amount applied for, his net salary - in aggregate when a couple - and his living expenses, are included in the procedural section. These are supplemented by social welfare costs and property tax. According to the Central Bank's guidelines and for the purposes of calculating net income, a husband and wife have monthly living expenses of around EUR 1120, followed by EUR 220 for each child under the age of 15 and EUR 370 for each child between the ages of 15 and 18. Banks may 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 prospective borrower for living expenses exceeds EUR 1120, the bank will automatically take that amount into account.
It is estimated that a husband and wife have monthly living expenses of around EUR 1120, and then an amount of EUR 220 is added for each child up to 15 years of age and EUR 370 for each child aged 15-18 years.
Candidates are tested
Following the submission of the financial data, the banking institution investigates the prospective borrower. In other words, a bank employee checks each client's identity number against the ARTEMIS system to identify any credit facilities he or she may have with other banks. For the purposes of the check, loans with other banks are considered, as are any overdue payments, and whether the applicant is a guarantor of another loan. Overdrafts and credit cards are also investigated.
How the instalment is calculated
The salaries of the couple are then added (for example, 1000 + 1000 euros), and living expenses and credit facilities are deducted from the total as previously stated. It is estimated that approximately 80% of the amount resulting from the deduction, can be used as a monthly installment. 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 an installment of approximately €480 of this total. According to banking circles, the institutions also carry out some "stress scenarios," or contingencies that may burden the candidate's financial situation. Examples given include a 15% increase in the installment or a 20% reduction in income and wages, but there are many others. If the DSR (Depth Service Amount), calculated by dividing the installment by the surplus number, exceeds 80%, the prospective borrower is automatically rejected by law.
Can a couple with 2,000 income take out a loan of 200,000?
In these cases, it is especially important that the bank considers both the level of education (depending on the degree, master's degree, whether it can be used to find a job directly in case of unemployment, opportunities) and the style or if you prefer the job's stability. A person working in the public sector (government) has an advantage due to 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 summarize, for a couple looking to buy a house or an apartment with a loan of 200,000€, the monthly installment is approximately 700€, with a maximum repayment period 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 a 2,000€ income, no children, and no other payments or outstanding payments can receive a loan of up to 200,000€, and it is especially helpful that in most banks, you can calculate the installment online according to the amount borrowed using a calculator on their websites. Finally, it was stated that the majority of loans are between $150,000 and 200,000, with close to 80% of applicants being approved.
[This article was translated from its Greek original]
