For a lending institution, a mortgage loan consists of making a sum of money available to a client to finance one of the following operations:
the purchase of accommodation (apartment, house) for residential use or mixed use (residential and professional),
the purchase of building land,
construction work on a dwelling ,
repair , improvement and maintenance work on the acquired property.
(Source: Légifrance, Consumer Code)
Note that a loan granted to finance exclusively the repair, improvement or maintenance expenses of a residential building is considered a consumer loan when it is not secured by a mortgage or other comparable security .
When a bank grants you a mortgage, it may require a guarantee which may take the form of:
a mortgage on the property acquired through the credit or another property in your possession, which the bank may seize in the event of default in repayment,
a guarantee taken out with a financial institution which undertakes to repay the credit in your place in the event of default,
the special legal mortgage of the lender of money (formerly lender of money privilege) which allows the bank to be compensated as a priority if the property loan is no longer repaid.
The duration of a mortgage loan is variable. It is generally negotiable with the banker.
Please note : since January 1 , 2024, it is possible to exceed the maximum debt period of 25 to 27 years if the real estate loan linked to the acquisition of an existing property gives rise to a work program whose amount represents at least 10% of the transaction (compared to 25% in 2023).
How to determine your borrowing capacity?
The banking institution determines your borrowing capacity by applying to your resources (salary, retirement pension, rental income, etc.) a debt service rate which, in principle, should not exceed 35%.
This borrowing apacity, which represents 30% to 35% of your resources, includes:
borrowing costs (loan considered as current loans, including insurance costs),
your rent , if you remain a tenant once you have acquired the property.
.To help you determine the feasibility of your real estate project, the National Agency for Housing Information (Anil) has developed a financing diagnostic simulator for your home ownership projects :
In addition, in order to strengthen your financing plan, find out about the assistance you may be able to benefit from to supplement your bank loan: social accession loan (PAS) , zero-rate loan (PTZ) or assistance from your community, for example.
You can finally consult the tool proposed by Anil in order to have an overview of all the aid offered by local authorities in favor of home ownership:
Recommendations of the High Council for Financial Stability (HCSF)
The High Council for Financial Stability (HCSF) periodically issues recommendations to banking establishments concerning the conditions for granting credit in order to prevent the risks of household over-indebtedness .
Since January 2021, the HCSF has recommended that banks do not exceed an effort rate of 35% of the borrower’s resources (net income before tax).
This recommendation is legally binding, although banking institutions retain a margin of flexibility, within the limit of 20% of credit offers issued per quarter.
Finally, these recommendations do not mean that a banking institution must grant you a loan with an effort rate of 35% over a period of 25 or 27 years. As the CNIL reminds us : ” there is no “right to credit” . The financial institution is free to sign a loan agreement or not.”
Home loan: how much does it cost?
The cost of a mortgage depends on the amount borrowed and the duration of the loan .
These two elements influence the amount of interest you will pay monthly in return for the loan granted by your bank.
In fact, the longer the loan is spread out over time, the more expensive it is, since interest is due on each monthly payment. Similarly, the larger the amount borrowed, the higher the interest due will be.
