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Debt-to-income (DTI) ratio
The limit on the DTI ratio, an indicator of total indebtedness, mitigates the risks from rapid growth in household indebtedness. Over-indebted households may have serious repayment difficulties, and their problems may eventually spill over into the whole financial sector and economy.
Limit
The debt-to-income (DTI) ratio limit is determined by the borrower’s age and the designated maturity of the loan.
- For borrowers aged up to and including 40, the limit is set at eight times the borrower’s annual household income.
- For borrowers aged over 41 who will have repaid their loan by the time they reach 65, the limit is set at eight times the borrower’s annual household income.
- For borrowers aged over 41 who will still be repaying their loan after reaching 65, the limit is reduced as follows:
| Age (years) | under 41 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | over 60 |
| DTI limit | 8 | 7.75 | 7.5 | 7.25 | 7 | 6.75 | 6.5 | 6.25 | 6 | 5.75 | 5.5 | 5.25 | 5 | 4.75 | 4.5 | 4.25 | 4 | 3.75 | 3.5 | 3.25 | 3 |
In the case of loans with co-borrowers, the maximum debt is calculated for each borrower separately.
Exemptions
- For up to 5% of new loans, the limit stated in the table may be exceeded
- For up to a further 5% of new loans that are mortgages for young people, the limit can be up to nine times the annual income.
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Further details about exemptions
- Mortgage loans for young people are for young people aged up to 35 and they may up to 1.3 times the average wage
- The periods over which compliance with both exemptions is checked are the first and second halves of the year. In a given quarter, the exemptions may amount to up to 7% of new loans
Calculation
| Debt | New loan Existing loans 20% of undrawn credit card and overdraft facilities |
| Annual net income | Annual income after contributions and taxes (documented and independently verified) |
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1. Illustrative calculation (for borrowers aged up to and including 40)
- Two co-borrowers, one aged 34 and the other 36, each have a monthly net income of €700 and apply for a housing loan with a maturity of 30 years.
- Both co-borrowers are aged under 41, so they are subject to a DTI ratio limit of 8.
Annual net income of the borrower aged 34 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 34 (8 × annual net income) €67,200 Annual net income of the borrower aged 36 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 36 (8 × annual net income) €67,200 Maximum loan for the household (sum of the maximum loans for each borrower) €134,400 The maximum loan amount for the household is €134,400.
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2. Illustrative calculation (for borrowers aged over 40)
- Two co-borrowers, one aged 44 and the other 46, each have a monthly net income of €700 and apply for a housing loan with a maturity of 30 years.
- Both co-borrowers will be aged over 65 when the loan matures. For the borrower aged 44, the DTI ratio limit is 7, while for the borrower aged 46, the limit is 6.5.
Annual net income of the borrower aged 44 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 44 (7 × annual net income) €58,800 Annual net income of the borrower aged 46 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 46 (6.5 × annual net income) €54,600 Maximum loan for the household (sum of the maximum loans for each borrower) €113,400 The maximum loan amount for the household is €113,400.
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3. Illustrative calculation (for borrowers aged over 40)
- Two co-borrowers, one aged 44 and the other 46, each have a monthly net income of €700 and apply for a housing loan with a maturity of 20 years.
- The younger borrower will be aged under 65 when the loan matures, so s/he will be subject to a DTI ratio limit of 8. The older borrower will be over 65 when the loan matures, so s/he will be subject to a limit of 6.5.
Annual net income of the borrower aged 44 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 44 (8 × annual net income) €67,200 Annual net income of the borrower aged 46 (12 × monthly net income) €8,400 Maximum loan for the borrower aged 46 (6.5 × annual net income) €54,600 Maximum loan for the household (sum of the maximum loans for each borrower) €121,800 The maximum loan amount for the household is €121,800.
Legislation
The statutory framework comprises the Housing Loan Act and Consumer Credit Act.
In addition, Národná banka Slovenska has laid down detailed provisons on the DTI calculation and DTI limits in the Housing Loan Decree and Consumer Credit Decree.
More information concerning loans that extend into retirement can be found in the explanatory memorandum to a new amendment to the Housing Loan Decree (in Slovak only) and in the explanatory memorandum to a new amendment to the Consumer Credit Decree (in Slovak only).
Further information can be found in financial stability legislation.
