Two applicants with the same salary can be offered very different loan amounts in Portugal. The reason is that banks do not look at income alone: they run several affordability tests at once, and the tightest one decides your limit.
DSTI: the ratio the regulator caps
DSTI (Debt Service-to-Income) is the share of your net monthly household income absorbed by all credit repayments — the new mortgage plus car loans, cards and personal credit. Banco de Portugal caps it through its macroprudential recommendation, and banks apply the cap to a stress-tested payment, not the payment at today's rate.
DCR: what is left to live on
Debt Coverage Ratio, or residual income, asks a different question: after every repayment, does the household have enough left to live? A €6,000 income at 40% DSTI leaves €3,600; a €1,500 income at the same ratio leaves €900. The ratio is identical, the risk is not. This is why high earners often borrow more than the headline ratio suggests, and modest incomes less.
The stress test on top
Banks do not assess your file at the rate you will actually pay. They add a margin to simulate a rise in Euribor and check the ratio still holds. On a variable-rate loan the tested payment can be meaningfully higher than the real one, which is one reason a mixed rate sometimes unlocks a larger loan.
What this means in practice
- Clear small consumer credit before applying — a €200 car payment can cost tens of thousands in borrowing capacity
- Every credit card limit counts, even unused ones at some banks
- A longer term lowers the monthly payment and improves the ratios, but costs more in total interest
- Adding a co-borrower with stable income is often the fastest structural fix
- Variable income needs two years of history to be counted at all
Before you start viewing properties, it is worth knowing which of the three tests is binding in your case — because the fix for each one is different.