DSTI and DTI

What it means

DSTI and DTI are ratios through which the National Bank of Slovakia limits household borrowing. DSTI compares monthly repayments on all loans with income, while DTI compares total debt with annual income. Banks must check them for every housing loan and consumer loan.

For DSTI, income is reduced by the household's subsistence minimum, and repayments may not exceed a set share of the remainder, currently 60 percent. Banks also calculate repayments at a higher interest rate so the client can cope with a possible rise in rates.

DTI generally caps total debt at eight times annual net income, with stricter limits for older applicants taking long maturities. Together with LTV, which compares the loan amount with the property's value, they form the main macroprudential rules for mortgages.

How it works in practice

For employees the bank uses net salary; for sole traders it uses the tax return. With a type B return, income is usually taken as the tax base or a share of turnover according to the bank's method, so low declared profit also lowers the loan amount available.

Sole traders using flat-rate expenses often show a low tax base, which helps with tax but reduces creditworthiness. Anyone planning a mortgage should consider in advance how their tax planning will affect the bank's assessment and have the last few years' returns ready.

DSTI includes repayments on all loans, including credit cards and overdrafts, often based on their limit rather than actual use. Cancelling unused credit cards and overdrafts before applying for a mortgage can therefore increase the amount available.

What to watch out for

The limits are binding on banks and cannot be circumvented. Banks do have a small quota for exceptions, used mainly for creditworthy clients. If the limits are not met, consider a smaller loan, a longer maturity within the rules or a co-borrower.

The National Bank reviews the parameters regularly in line with market developments, so specific values may change. Before applying for a loan, check the current rules and discuss the calculation with the bank or a financial intermediary.