Debt-to-Income Ratio (Taxa de Esforço)

What Is It?

The Debt-to-Income Ratio (Taxa de Esforço) represents the portion of your income that is already committed to loan repayments.

It measures how much of your monthly earnings is effectively reserved to pay debts from the moment your salary arrives.

What Is It For?

The Bank’s “Traffic Light”
Banks use this ratio to decide whether to grant financing.
If too much of your income is allocated to debt payments, the bank considers the risk too high and may refuse the loan.

Your Financial Safety
It helps determine whether you will maintain financial flexibility or live under excessive financial pressure after taking on a mortgage.

How Is It Calculated (In Practice)?

Start with your net monthly income (the amount received in your bank account).

Then add:

• all existing loan repayments (car loans, credit cards, personal loans, etc.), and

• the expected monthly payment for the new mortgage.

Ideal scenario:
Total debt payments should not exceed one-third (≈33%) of your net income.

Typical bank limit:
Portuguese banks rarely approve mortgages when total debt commitments exceed 35% of income.

Simple Example

If your net monthly income is €1,500:

• Total loan payments of €500 → Debt-to-Income ratio = 33% ✅ (generally acceptable)

• Total loan payments of €750 → Debt-to-Income ratio = 50% ❌ (approval becomes unlikely)

At this level, half of your income is already financially committed.

What Counts as Income?

• Base salary

• Pensions or retirement income

• Rental income from leased properties

Note:
Variable income such as commissions or bonuses may not be fully considered by banks when calculating the Taxa de Esforço.