As of July 1, 2019, the LKT limit will change, and you will need to provide more income to the bank to grant the same installment. We have briefly summarized the most important information and what you should pay attention to before borrowing.
Factors influencing credit
Due to the debt brake rule, the amount of net credible income a borrower has can influence how much of a loan he or she can borrow. In addition, for mortgages, the estimated market value of the property being repurchased is also a factor, with a maximum of 80 percent of the loan amount. In the case of personal loans, the debt brake also determines the percentage of net income that a claimant can spend on repaying a loan. This is, of course, regulated with the aim of preventing debtors from taking on burdens that they cannot manage safely and in the long term.
The Yield Ratio (LKT) depends not only on your net income but also on the type of loan (personal loan or mortgage) and the length of the interest period (less than 5 years, between 5 and 10, or longer than 10 years) “High income” earns more than $ 400,000 in net monthly income. This amount includes the existing credit line at a rate of 5 percent, even if the applicant has not reached it. The length of the interest period is important because the interest rate on the loan and the repayment installment can change only after the maturity date. This way, the longer the period, the easier it is to calculate your monthly payment in advance. Again, this only helps in anticipation, but also has financial benefits: any increase in the borrowing rate can only bring about changes in the repayment of the loan after the end of the interest period.
The limit rises to 500,000
As of July 1, the threshold for high income will change from 400,000 forints to 500,000 forints. In Hungarian, applicants must prove a higher income in order to qualify for a repayment at the same time as before July 1st. So the bottom line is that in order to charge more than 25% of your income on mortgages and 40% on personal loans, you will need at least $ 500,000 in monthly net income proof as of July 1, 2019.
What if my monthly installment is too high?
It may be a solution if you take less credit, but you may not be able to. In this case, we can “reduce” the installment by extending the maturity. However, this is fraudulent, as it takes longer to charge the loan, so the total repayment rate, which is the amount we pay the bank for the loan until the end of the term, increases. For example, the total repayment of a 10 million loan with a fixed interest rate of 10 years and a 15-year maturity is 13.6 million forints, while a 20-year maturity is 14.9 million forints. Thus, it is true that the repayment installment is repaid to the bank by more than HUF 10,000 a month, but by a total of HUF 1.3 million.
Good advice in this situation
The LKT was modified in October 2018, and then the practice of banks was not uniform. There were banks that took into account the LKT rate when accepting a loan application, while others considered it when evaluating a loan. The average turnaround time for a home loan is 4-6 weeks, so if you are applying for a loan after April, if your income is at the border, you might want to ask your bank how to proceed. Credit experts will also help those interested.
Changes also affect ex-ante credit ratings. It is useful to keep in mind that even if the pre-qualification expires after July 1st, the LKT limit on submission or adjudication still applies to the credit application. This is a good idea to calculate, and it is worthwhile to determine the amount and repayment of the loan you want to borrow.