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Financial Dictionary - Risk profile
Risk profile
When applying for a mortgage, your risk profile will be the factor that determines your level of solvency to repay it. That is, when you request a mortgage loan from the bank, it will carry out a study that assesses your ability to meet the instalments throughout the life of the loan and pay off the debt you took out with it over the years. The result of this analysis (also known as bank scoring) will be decisive for the bank to grant you the loan, and will depend on certain aspects such as your level of income, your expenses and other loans that you have taken out at the time of applying.
Now you know which house you want and how much you need, calculate your mortgage.
More specifically, the credit institution will need to know the following information:
- Your age and family and personal information. According to the banks, mortgage holders should not be over 75 years of age at the end of the loan.
- Your work situation. Banks may want to see our work history, e.g. time with the company, continuity of employment and periods of unemployment, type of contract (permanent, temporary, public servant, placement, self-employed, etc.) and so on.
- Your income. The monthly mortgage repayment should not be more than 30% of our net income. The bank may ask us for our most recent income tax return, payment slips for other loans, payslips and supporting documents for other sources of income, if we receive other income such as rent and pensions.
- The assets you own, or capital solvency. In other words, your movable and immovable property (properties, premises, garages, etc.). The entity can find this information in the Property Registry.
- Any debts and non-performing loans, which they can find out from the CIRBE (Banco de España's Risk Information Centre), a database containing our profile and records as applicants.
- Your debt level, which is calculated by adding up the income of our family unit, establishing mortgage repayments not exceeding 40% of this sum.
This risk profile has acquired greater significance with the new Mortgage Law, which obliges credit institutions to perform a more thorough assessment of borrowers.
Pre-appraising the property is also highly recommended because it will also help to get an idea of your options. Since banks usually grant 80% of the appraisal value, you will need to see whether you can meet the remaining 20%. If not, you will know in advance that you will not be granted the mortgage and you can save a lot of paperwork.
Pre-appraising the property is also highly recommended because it will also help to get an idea of your options. Since banks usually grant 80% of the appraisal value, you will need to see whether you can meet the remaining 20%. If not, you will know in advance that you will not be granted the mortgage and you can save a lot of paperwork.