French Mortgage Rates and French Banks
French banks are attracted by non-resident clients as they usually have a good financial position; however they know that it will be complicated for them to work actively with these clients.
Usually banks earn money on the credit card package and on additional services such as insurance for your apartment or management fees on savings account. In the case of a non-resident client, they know that the client is mainly attracted by mortgage and that the bank account will not receive the client’s main income so they tend to offer higher rates and be slightly more demanding in terms of affordability.
When Should I Check my Affordability?
Trust French Mortgage Expert's Team for Your Borrowing Capacity and Affordability
The best way to proceed is to contact us at the very beginning of your French property search. We will give you the precise amount that you could borrow so that you have a clearer idea of your total budget.
Also, it will help you to have your offer accepted by the seller if he knows that you already have checked your affordability. French Mortgage Expert would give you a “favorable opinion” document that could be useful during the property price negotiation.
We will also explain to you how the French property purchasing process works and what you should be careful of.
Ratio Between Income and Outgoings
The main criterion to decide how much a client can afford is not his gross wealth, not even his net wealth. It is the ratio between his income and his outgoings. This ratio has to be less than 33%, factoring in the new monthly payment of the prospective project.
“Income” are the average of all income received over the past three years. “Outgoings” will be your long term monthly commitments such as rent or French mortgages. As an example a car loan ending in less than 6 months might not be counted as an outgoing. Rules can be slightly different in case of self-employed profiles or sole traders. However this debt ratio logic remains the same.
Yearly income against global debt
Banks' Focus: Ratio between Total Outstanding Capital on Mortgages and Yearly Income
Recently, banks started to focus on a new criterion which is the ratio between your total outstanding capital, on all your mortgages, against your yearly income. Most of bank lending policies allows a maximum outstanding capital of 6 times your annual income. If it is more, then you might not be able to borrow even if your debt ratio is below 33%.
As an example it means that a client earning 100 000 € on a yearly basis and having already a mortgage on his main home of 600 000 € couldn’t afford any new mortgage. One of the consequences of this rule, which is not always applied, has been to exclude professional property investors as they usually have a massive outstanding capital.