How is affordability for a French mortgage calculated?

You may be wondering how much you are allowed to borrow, what sort of repayment plan would suit you or even whether you can take out a French mortgage at all.

Mortgage affordability is calculated in two different ways, depending on the country you’re applying for a mortgage in. For instance in the UK, Australia and the United States, the mortgage you can take out is calculated by using earnings multiples- however much you earn in a year, multiplied by five is the amount you may borrow. Thus if you earn £20,000 PA you may borrow £100,000. If your spouse also earns £20,000 then you can borrow £200,000.

However in European markets, including France, affordability is calculated using a debt burden, usually of between 30 to 40%, of the applicant’s income in a month. Indeed, lenders must weigh up affordability very carefully due to consumer law. Each lender determines what is and what isn’t affordable on a case by case basis, meaning the advice and assessments can vary. You will also find that some use gross income and others use net income. If you already live in France it is likely that the French lender will base the calculation on your net income.

It all means that a person’s repayments, which could include an existing mortgage, rent , debt or loan commitments- or any other contractual financial commitment- (though not credit cards, utility bills, council tax etc) must not total more than 30 or 40 % of the monthly wage. If the applicant earns £1,000 a month, and already has a debt repayment of £100 a month, then he cannot take out a mortgage where the monthly payments are more than £300 per month maximum. Of course, if it is a joint application, then both applicants’ incomes are added together, as are the other’s financial commitments.

So, if you compare two different applicants who may have matching salaries, they would not be able to be lent an identical amount on a French mortgage if one of them had many more existing “financial commitments” than the other. They would have different “affordability” capacities, even though they may bring home the exact same amount of money each month. Therefore, there is no straightforward response to the amount you can borrow, as your own position, earnings and expenses are evidently unique to you. Obviously, if you are keen to take out a French mortgage, you will be extremely unlikely to be able to do so if a third or so of your monthly income is already taken up by other financial commitments.

For more information about French Mortgages and to get a free quote, please get in touch with our French mortgage department by telephone on 0207 428 4918 or by email: mortgages@sextantproperties.com

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