In order for the bank to approve you for a mortgage, they look primarily at two factors: loan to value and debt to income :
Loan To Value (or “LTV”)
For French residents, banks usually offer to lend 100% of the purchase price including agent fees. However, rates tend to drop when the deposit is equal or more than 20-30%. In any case it is preferable that you can at least fund the notaire fees yourself.
For Non residents, the maximum loan to value banks can offer is usually around 80% of the purchase price including agent fees (with 1 bank going up to 85%). This can vary according to the country in which you reside/declare your taxes in and your mortgage preferences.
On top of this 20% deposit, you will also have to fund the notaire fees yourself, thus a total personal contribution to the total project of about 30%.
“Thank you for all your assistance in organising the mortgage – you have been a massive help and I really appreciate that.” Lara
Purchase price = 300,000€
Notaire fees = 24,000€
TOTAL cost = 324,000€
Maximum amount to borrow 80% of purchase price = 240,000€
Personal contribution =84,000€
Debt ratio (or DTI)
The single most important element in successfully getting a mortgage in France is INCOME. French banks will base their calculation on the ratio between income and outgoings, and this ratio should not be more than 33%, including the new project monthly payment.
If you earn 3,000€/month as a salary, your monthly outgoing cannot come to more than 1,000€/month.
“Yes all went well and we are now owners of the house. Thanks to all of you for your help in getting this completed.” Adam
Another important factor to take into account is the “residual” income, what is left for you to live with after you have paid your bills (mortgages, personal loans, car loans/leases). In fact, banks are sometimes willing to allow a higher debt ratio (35-40%) if the residual of the household is above a certain level.
On the contrary they will not agree on the request if the residual income is not sufficient to maintain the household, even when the debt ratio is acceptable
In terms of what the banks will retain for your monthly revenues, well some banks use your net income, some your gross income. They will take into account the existing rental income received (about 70-80% of it) and add it to your revenues or subtract it to the existing debts. Although they might not retain the potential rental income of the new project, demonstrating the rental capacity will certainly push your request forward.
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