Amortize to Escape the Debt-to-Income Ratio: Free Your Budget

In Portugal, the Debt-to-Income Ratio (Taxa de Esforço) is the queen of bank approvals. The Bank of Portugal recommends that your monthly installments do not exceed 50% of your net income.

But with the rise of Euribor, many families have seen their effort rate jump from 30% to 55% or 60%.

The Problem: Financial Paralysis

When your effort rate is in the "red":

• You cannot ask for a car loan.
• You cannot finance home renovations.
• You cannot get credit cards.
• You live with a noose around your neck every month.

You have become a "risk" to the banking system.

The Agitation: Cut the Installment, Not the Term

Most people think of amortizing to "finish the loan sooner." But in Portugal, given the monthly pressure, the priority must often be "Reduce the Installment."

By amortizing capital and choosing to keep the term, your monthly installment drops immediately.

Example: On a debt of €150,000, amortizing €10,000 can lower the installment by €60 or €70 monthly. This can be the difference between having an effort rate of 52% (rejected) or 48% (approved).

The Solution: Strategic Amortization

If you need to unlock your credit capacity for another goal (or just to breathe), use your savings to pay down the mortgage with the explicit goal of lowering the monthly payment.

Also, check if the government has temporarily suspended the early repayment fee (a common measure in crises), which makes the operation free.

📱 The Simulation on Amorti

See how to regain control.

1. Enter your credit into AmortiApp.
2. Go to "Extra Payments" and enter the available amount (e.g., €5,000).
3. Select the option "Reduce Payment" (not Reduce Term).
4. See the new monthly payment.
5. Calculate your new Debt-to-Income Ratio: (New Payment + Other Loans) / Net Income.

If the result is < 50%, congratulations. You have recovered your financial freedom.

Lower the payment. Recover your life.

Simulate New Payment