How much can I borrow?
How do overseas lenders calculate what you can borrow?
Overseas lenders calculate what you can borrow based upon affordability. Each lender has its own set of terms but in general they all work to similar guidelines.
These guidelines hinge in the main on two questions:
• Can the clients prove their income?
• What is the client’s debt to income ratio (DTI)?
If you cannot prove your income then the mortgage will be declined. Overseas banks confirm affordability and have never embraced self-certified mortgages. Proof of income if employed will be via payslips and end of year tax figures and if you are self-employed then by providing two years accounts. Most lenders work on this debt to income ratio. This is effectively, the percentage of income, which is used to service debt. This ratio differs from country to country and from lender to lender.
In Spain, for example, the DTI tends to be 35%. So in the case of a buyer who has net income per month of £3000.00, the buyer’s new overseas mortgage payment plus their existing monthly debt payments including any existing mortgage, loans or credit card payments must not exceed £1050.00.
Let’s say they have a mortgage payment of £550, a monthly credit card bill of £100 and their new overseas mortgage will be £400, then in this instance they would be approved by the overseas bank.
“How do I propose to finance my overseas property purchase?” Should be the first question you should ask yourself before signing anything. Armed with that little bit of information you already have an idea as to how an overseas bank will view you and how successful your mortgage application is likely to be.
Try out our mortgage calculator to see how much your mortgage is likely to cost, you can then add this to your existing outgoings to see what percentage of your disposable income is used up.