In short
- The loan may not exceed 90% of the home's value (95% with a state guarantee).
- Monthly payments on all your loans may not exceed 40% of your net income.
- All your loans together may not exceed 6 times your net annual income.
- With €1,500 net a month and no other loans, that is up to about €108,000.
The three limits set by Latvijas Banka
These limits apply to every bank. A bank may be stricter, never looser.
| Limit | What it means | Energy-efficient home |
|---|---|---|
| Loan to value | Up to 90% of the home's value, up to 95% with a state guarantee | Same |
| Payments to income | Monthly payments on all loans up to 40% of net income | Up to 45% |
| Debt to income | All loans together up to 6 times net annual income | Up to 8 times |
| Term | Up to 30 years | Same |
How much mortgage can I get: the calculation
An example: your net income is €1,500 a month, you have no other loans, the rate is 4% and the term is 30 years. This only illustrates the maths.
- Payments to income. 40% of €1,500 is €600 a month. That payment can repay about €125,700.
- Debt to income. Your net annual income is €18,000. Six times that is €108,000.
- The lower of the two. Your loan is up to €108,000.
- Loan to value. With a €108,000 loan and 10% down you can buy a home up to €120,000, as long as you have €12,000 for the down payment plus money for costs.
At a rate around 4%, the 6-times-income limit usually decides. Above roughly 5.3%, the 40% limit takes over.
Quick table by income
No other loans, 4% rate, 30 years. The loan ceiling is the lower of the two amounts.
| Net income a month | By the 40% limit | By the 6-times-income limit | Maximum loan |
|---|---|---|---|
| €1,200 | €100,541 | €86,400 | €86,400 |
| €1,500 | €125,677 | €108,000 | €108,000 |
| €2,000 | €167,569 | €144,000 | €144,000 |
| €3,000 | €251,353 | €216,000 | €216,000 |
What lowers the amount
- Other loans, leases and credit card limits: their payments and balances count too
- Irregular income or income that is hard to prove
- Small savings for the down payment
- A bank valuation below the purchase price
- A shorter term: the payment is higher and you hit the 40% limit sooner
How to raise the amount within the rules
Apply together with a partner: the bank counts your combined income. Before applying, pay off small loans and close credit cards you don't need. Consider an energy-efficient home, which has higher limits.
If you are a family with children or a young specialist, the ALTUM guarantee can lower the down payment you need, but the income limits stay the same.
Common questions
How much mortgage can I get on a €1,000 salary?
If €1,000 is your net pay and you have no other loans, the 6-times-income limit gives up to €72,000. A bank may offer less.
Does the bank count gross or net salary?
Latvijas Banka's limits use net income, meaning the amount after tax.
Does my partner's income help?
Yes, if you apply together as co-borrowers. The bank then looks at both incomes and both sets of loans.
Does a credit card limit reduce the amount?
It can, as banks often count it as an existing commitment. Better to close an unused card before you apply.
Sources
- Borrower-based measures · Latvijas Banka
- Kā rīkoties, ja kredīta līguma slēgšanas brīdī DSTI ir pārsniegts · Patērētāju tiesību aizsardzības centrs (PTAC)
This article is for information only and is not legal, financial or tax advice. It may contain mistakes or be out of date, so check it against official sources or with a specialist before you decide. m²cena accepts no liability for any loss or damage arising from the use of the information in this article.