Expatriates: How to assess your mortgage capacity?

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Most people find themselves expats because of a professional opportunity, with financial advantages often being part and parcel of the deal. But when it comes to taking out a loan in France, things can get complicated – salary paid abroad, type of contract, requests for collateral are the main obstacles you can face. There are solutions, however, but how is a mortgage calculated? What lending rates do French banks apply to expats? And more importantly, how can you be sure that a French bank will grant you a mortgage for your project? Answers.

You don’t have a French employment contract : the deal-breaker

First of all, before granting you a loan, a bank will want to evaluate the risks it’s taking by lending you money. For non-residents, the main criteria for evaluating the risks is what type of work contract you, as an expat, are working under.

Secondment Contract

If you have a French employment contract and you’re seconded to another country, you are, as far as most banks are concerned, considered to be a French resident. This means that you won’t have any problems obtaining a loan from your bank or broker.

That’s the best possible position you could find yourself in.

Local Contract

If you have a local contract, which is the case for most expats, you shouldn’t find it too hard to obtain a mortgage. But the conditions of your loan will depend on your employer – if you work for a big multinational like Alstom, Total or Schneider Electric for example, you’re considered as being low risk and it should be easy for you to obtain a loan. On the other hand, if your employer is a lesser-known SME based abroad, you will be considered as a slightly more risky prospect. Although not a deal-breaker, you should expect to be offered a higher rate of interest than average.

Entrepreneur

Finally, if you are a non-resident company director or work abroad as a freelance, your chances of obtaining a loan in France are virtually non-existent. Almost all the banks point blankly refuse financing to company directors based abroad, even if you’re earning a very comfortable income or if you’re intending to put down a sizeable deposit.

How much will I be able to borrow?

Except if you’re a company director or freelance working abroad, you will be able to borrow money in France as a non-resident. The question is, how much will the banks be prepared to lend you?

The bank’s calculations will be based on your monthly earnings and more precisely on your net expenses/income ratio. Generally, for your request to be accepted by a bank, this ratio must not exceed 30-35%.

Your outgoings are mainly made up of long-term obligations, the main ones being: your rent, repayments of existing loans and perhaps pension payments. Conversely, your children’s school fees and the cost of living in the country you’re living in are not taken into account. As far as wages are concerned, the bank is only interested in fixed income. Any dividends and bonuses that you may receive don’t enter into the decision.

The lower this ratio is, therefore, the more the bank will be prepared to lend you.

What interest rates can expats expect?

Whether you are a French resident or an expat, the interest rate is synonymous with the risk you represent for the bank. The lower the risk you represent for the bank, therefore (according the bank’s own criteria), the lower the proposed interest rates will be. But for a bank, expats represent, by definition, a higher risk. They live in a different jurisdiction to the bank. On average, rates granted to expats are therefore between 0.2% and 0.5% higher than the average rates proposed to French residents.

On average, rates granted to expats are therefore between 0.2% and 0.5% higher than the average rates proposed to French residents.

 

Banks will take several criteria into consideration, in detail, to calculate your borrowing rate. Some of these criteria are specific to French expats. As we have already seen, that is the case, in particular, for the type of employment contract you have abroad. Then comes your level of education, the size of the deposit you can get together, as well as the length of time over which you’re looking to repay your mortgage.

In conclusion, it all depends on your personal and professional status and a number of different parameters are taken into account. You should also realise that although the information given is correct in most cases, your relationship with your bank and your personal banker can, of course, have an impact on the conditions under which you’re offered a mortgage.