How much am I able to borrow?
In the UK it’s all about income multiples, but in France they calculate your affordability based on a debt-to-income ratio. Our guide explains what you need to do to work out your maximum budget
6 Jul 2021
In the UK it’s all about income multiples, but in France they calculate your affordability based on a debt-to-income ratio. Our guide explains what you need to do to work out your maximum budget
6 Jul 2021
Understanding what your budget is before committing to a French property purchase will always be worthwhile – many people are surprised by how far their money can get them in France (check out our French Mortgage regional guides for an overview of the most popular areas) and what they can afford, especially if you explore buying with a French mortgage. This is where our French Mortgage Calculator, alongside our Latest French Mortgage Rates Tables can really help.
If you are thinking of buying cash, then the first thing to do is research purchasing with a French mortgage! Even if you do have adequate cash savings there is a significant advantage in keeping some or all of those sterling/non-Euro savings liquid for the future (equity release is almost impossible and very expensive in France) and borrowing in Euros also mitigates the exchange rate volatility.
Purchasing with a French mortgage, rather than in cash, can even allow you to increase your budget!
The first thing to ascertain is whether you could meet the basic eligibility requirement of not having more than 33% of your monthly income taken up by contractual debt (all mortgages, car loans, personal loans including credit cards you don’t pay off in full each month). Use our French Mortgage Calculator to check how much of your monthly income can be taken up with your current debts and the new French mortgage. Total up your current monthly liabilities to work out the maximum monthly payment of your new French mortgage. For example, if your annual household income is €100,000, your monthly liabilities must not be more than €2,750. If your current monthly mortgage is €1,500 and you have no other personal loans or car finance, then your new French mortgage monthly payment can be a maximum of €1,250. Make a note of this and then head to Step 2. (It is important to note that, unlike the UK, each French bank has different mortgage eligibility criteria including varying rules on age, source of income, nationality and residency status. IPF can advise you on which banks and products would be most suitable for your circumstances and give you a personalised quote within 15 minutes, so please do get in touch).
To work out how large a loan you can afford, based on the maximum French mortgage monthly payment you would be permitted, head over to our Latest French Mortgage Rates Tables and have a look at the products and rates that are currently on offer. There are fixed and variable rates (starting at 1.25%) on a repayment and interest-only basis. Make a note of the French Mortgage rates that are of most interest to you and then head over to our French Mortgage Calculator to work out what loan size your monthly payments would be. It’s an easy calculator to use, and you use the sliders to change the loan size, rate and term to find the best option for your situation. Based on a rate of 1.5%, over a 20-year term, and a maximum mortgage payment of €1,250 per month, you could borrow €260,000. The highest LTV available to non-residents is 85%, so you could be looking at properties with a maximum purchase price of around €305,000.
As mentioned above, the maximum LTV typically available to non-residents is 85%. Therefore, you need to be able to show the bank that you have the means to pay the 15% deposit requirement to meet the purchase price. You will also need to pay the Notaires fees as these cannot be added to the loan amount. The French banks will also look to see that you have enough assets (liquid or not) left over after the purchase to cover any unforeseen circumstances. In other words, they want to ensure that you haven’t over-stretched yourself. Use our French Mortgage Calculator to work out exactly how much you will need to pay in cash (deposit and notaires fees) and how much you need to show you have as a savings buffer in order to get a French Mortgage. Continuing the example above, if you are purchasing for €305k and borrowing at 85% LTV you need to have €45k in cash for the 15% deposit, and another €23k in cash for the notaires fees and associated transaction costs as well as €30k in other assets as a savings buffer.
The really useful thing about the French Mortgage Calculator is that you can play around with them whenever you wish – they are online 24/7. So, if you are browsing the internet and fall head over heels for a French home, you can quickly ascertain what it will take to purchase it. Give us a call, or complete our online form and we can run through all the figures with you and provide you with a personalised quote. Which just leaves you to book in a viewing trip, putting you well on the way to realising your dream of owning your own French bolthole!
6 Jul 2021
