Understand the bank criteria for French mortgages can be daunting. At first glance the range of options can seem bewildering, and with many options the types of criteria which banks have to consider can be huge. However, our experience enables us to cut through the paperwork quickly and find out what our customers will be able to afford.
Bank underwriting criteria apply to the maximum age the bank will accept for mortgage products, when considering the maximum duration they will agree to lend over for each client. In general, it is possible to get a mortgage until the age of 80, when the mortgage must be paid off. So to qualify for a mortgage until the age of eighty, the maximum age is fifty years old. When considering joint applications, the age of the older borrower will be used when deciding what the maximum duration would be. The only exception is when the income from the elder borrower is not being taken into consideration. Age is also a consideration when setting the amount which will usually have to be paid for life assurance to cover the loan in France.
As indicated above, age is an important consideration when setting life assurance rates in France. Younger applicants will obtain cover with lower monthly payments, whilst older applicants will pay more.
If you have had any medical problems in the past, or you are borrowing a large amount of money, you may find that the French life assurance company will ask you to undertake medical tests.
You may be refused life assurance altogether if you have had serious medical problems. However, it may be possible to arrange a loan without life assurance in some cases or to assign UK life assurance cover, but only for a reduced selection of French mortgage products. A French mortgage broker can help you to package your application to the bank which will look most favorably on your application.
As mentioned above, some banks look at the assets a client holds before deciding to make a loan to the applicant. Many banks apply a net asset criteria for certain loan to values and products. A good example of this is an interest loan, for which some banks may ask to see a net asset position of 120% of the loan amount.
Net assets are found by taking existing asset values such as property owned, share or bond portfolios and money in non-pension savings accounts and deducting all outstanding loan amounts. If the eventual amount is more than 120% of the loan amount desired the French bank will have no problem making the loan, though income criteria still apply.
Likewise, other banks may require you to be a homeowner, or that you hold 30% of the purchase price in cash, before accepting you as a client.
Many banks have different lists of jurisdictions and countries to which they will give different levels of loan-to-value of the French property. Members of the European Union, America, Canada, Japan, Hong Kong, Singapore, Australia, New Zealand, and many offshore tax havens are able to get the maximum levels.
All other countries will probably see a reduction in loan –to-value to 60% or 70% depending on the bank. EU citizens working for multinationals abroad may still be able to get the maximum.
What we are looking to see is if your existing monthly payments for loans and mortgages exceeds one third of gross monthly income.
This is calculated by dividing your outgoings for debt payments by your gross salaried income or net profit from self employed income.
Rental income from rental properties will also be considered by French banks, as well as any future rental income from your target property in France.
For example if you earn the equivalent of €3000 per month, a French bank will not allow your total payments for your existing borrowings and the future mortgage to exceed €1000 per month for a second home.
The first step is to speak with a professional French mortgage broker who will ask a few important questions to establish your eligibility with a number of different banks. Each French bank has different underwriting criteria and products, so running your situation past a broker will help you to understand your options. French banks are notorious for saying yes at the beginning of the process only to perform a ‘volte face’ at the final minute, leaving would be borrowers frustrated as the purchase deadline approaches. We see many cases like this, so aim to reduce the risk of wasting time and money, by applying the ever-evolving banks criteria in advance to produce the most appropriate offers, based on our experience of the current market conditions. As brokers we do not carry out UK credit checks but can give a decision-in-principle. French banks will carry out a credit check once they receive your French mortgage application form.