What data do french lenders use to build your application?
1 – From marital status to age… French lenders will have a look at everything
The first aim of the bank is to determine if you meet the requirements for your real estate project. Lenders will want to know more about your personal situation (marital status, age, health…) and about the property you wish to purchase (price, plan…).
Even if you want to obtain a mortgage alone, in France most banks will require the same details concerning your spouse (if applicable). Lenders will put together your income and debts to come up with a maximum mortgage amount.
Age and health status are also very important factors, <the younger and healthier the applicant, the better the insurance rate. Usually, local banks will require you not to cross the 70 years old (except for private banking). For the rare lenders who might accept, the oftentimes high insurance rate has a good chance to make the whole operation not worth it.
2 – They will take a closer look at your financial situation
Concerning the mortgage itself, banks will require you not to cross 33% debt to income: To give an example, if you have a total income of €3,000 per month,Your repayments should not exceed €1000 per month and this is by assuming that you do not have any debts.
Why did you use the word should?
Because some banks can push the limit to 40% if they decide that the applicant has a sufficient “reste-á-vivre” (literally, left-to-live). It is far easier for someone earning €10,000 income per month to live with 40% indebtedness in comparison with someone earning €3,000.
Some banks look at the assets a client holds before deciding to offer a loan, and many of them apply a net asset criteria for certain loan-to-values and products. A good example of this is an interest-only 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 should have no problem making the loan – though income criteria still apply.
Other banks, however, may require you to be a homeowner, or that you hold 30% of the purchase price in cash before accepting you as a client.
In any case, you need to have enough savings to support the deposit, the fees and prove that you have enough savings left after the purchase for the rainy days.
3 – Purchasing through a company: Let’s see how it works
We had many calls from people wishing to purchase a commercial property in France. Especially popular are gites and fishing lakes. Sadly, these types of properties are not financeable by the average high street lender as they are considered to be commercial activity and hence require a professional loan for businesses. The only caveat is if the plan is to convert the property – or it is not apparent that the property is commercial.
The good news is, France permits individuals to set up a family SARL (LLC). We have already created an article dedicated to this subject: SARL: Is it viable for your real estate project in France?
4 – What are the French banks’ approach and what is our role in it?
It is a little hard to lump them all together, though there are definitely some patterns. Whether we are dealing with a national company or a single small branch banker, they will be extremely fastidious. It is unusual to be able to skip any part of the process or to substitute any of the documents they require for another. Their overall attitude is that they have enough customers for day-to-day banking (and who tick all boxes they have).
So why waste the time if you don’t see to be ticking all the boxes? By using a broker, you can gain their invaluable experience in presenting applications to the lenders in a way which will be more acceptable to them, so our recommendation for mortgage applications in France and elsewhere is: always use a broker.