Getting a mortgage is becoming more difficult in Spain, and more expensive. Banks have tightened the criteria and conditions for housing loans in line with the rises in the reference interest rates of the European Central Bank (ECB). And on many occasions family income and guarantees are not enough. But… How much do I really need to earn per month?
To begin with, first of all, it must be borne in mind that financial institutions do not generally finance the 100% of the value of the home. Typically, the loan is given for up to 80% of the value. In this way, the client will need to have saved at least 20%, to which another 10% would have to be added to face expenses, taxes, reform…
Once this is clear, it is necessary to check if the mortgage payment would involve too great an effort in relation to the monthly income of the mortgaged person. The bank, thus, has internally set limits of up to what percentage of income per month the loan fee can represent.
Miquel Riera, Head of Mortgages at HelpMyCash, explains where entities usually set the limits. «The limit may vary according to the risk policy of each bank, but it is usually of between 30% and 40%. This means that a person will not be able to obtain a mortgage if their future installment, added to the monthly installments of the other credits that they have in force, exceeds between 30% and 40% of their net monthly income, “he points out.
To give an example: if you want to obtain a mortgage of 150,000 euros, with a term of 25 years and an interest rate of 4% (fixed rates move at this level), the monthly installment you will have will be just under 800 euros. The bank will require that this amount does not represent more than 40% of your income, with which you must earn around 2,000 euros per month net to meet this requirement.
80
percent
This is the percentage of the value of the home up to which banks usually finance
However, this percentage is not the only thing that financial institutions look at. “Job stability is also a very important factor. If the applicant works for someone else, he will be more likely to get the mortgage if his contract is permanent and he has been working at his company for six months or more. And if he is self-employed, for his request to be approved he must be the owner of a stable business from which he has obtained recurring benefits for at least two years, “says Riera.
Likewise, the HelpMyCash expert highlights that “it is important to have a good credit history, that is, not to have many current debts and that all of them are up to date with payments. If the bank detects unpaid debts in the Bank of Spain Risk Information Center (CIRBE) or in delinquency files such as ASNEF, it will automatically reject the applicant’s request.
