Will existing loans affect my borrowing capacity?
Your borrowing capacity is based on your ability to service the repayments. The more loans and in turn repayments you have the less you will have available to service a mortgage.
In this regard if you are contemplating buying your home in the near future, think carefully before committing yourself to debt repayments that may effect your morgtage borrowing capacity.
In general lenders get a little uneasy when repayments exceed 35% of net income. Lenders also stress test all applications to calculate the impact of a mortgage rates rise on this ratio.
It is also worth noting that lenders place very significant emphasis on credit history and your pattern of meeting any existing loan commitments.
In this regard if you are contemplating buying your home in the near future, think carefully before committing yourself to debt repayments that may affect your mortgage borrowing capacity.
In general mortgage underwriters get uneasy when total repayments on all loans exceed 35% of net income. Lenders stress test all mortgage applications and calculate the impact of a mortgage rate rise on the repayments .
Lenders place a significant emphasis on your credit history and your pattern of meeting any existing loan commitments.
Avoid unpaid direct debits and accounts going into an overdraft situation ( even if you have an agreed ‘overdraft facility’ ‘ with your Bank ). Your overall ‘borrowing capacity’ is based on your ability to service the mortgage and the more short-term loans you have then less funds you will have to service a mortgage.
If you are contemplating buying your home in the near future, then avoid committing yourself to short terms loans that will affect your overall mortgage borrowing capacity.
Ensure repayment on any loans are up to date, that credit cards are paid off monthly and don’t run your current account into an overdraft situation.
Once your application is submitted for formal approval the lenders will run a credit check via the Central Bank of Ireland’s Central Credit Register.
