Brendan Burgess
Founder
- Messages
- 52,270
The first test a lender should apply is the affordability or LTI test.
Then they should also apply the LTV test.
If someone is on the limits of the LTI test, but they have a low Loan to Value, then the bank's risk is low.
|John|Mary|Paddy
Salary|€100k|€40k|€40k
Deposit|20k|€50k|€10k
It's probably ok to lend John €200k or 90% LTV
It's probably ok to lend Mary €160k as the LTV will be only around 75%
Paddy should probably not get a mortgage of over €50k
Rather than have two separate allowances for exceptions, there could be one allowance of 20% exceptions for either criterion.
Then they should also apply the LTV test.
If someone is on the limits of the LTI test, but they have a low Loan to Value, then the bank's risk is low.
Salary|€100k|€40k|€40k
Deposit|20k|€50k|€10k
It's probably ok to lend John €200k or 90% LTV
It's probably ok to lend Mary €160k as the LTV will be only around 75%
Paddy should probably not get a mortgage of over €50k
Rather than have two separate allowances for exceptions, there could be one allowance of 20% exceptions for either criterion.