BUYING A PROPERTY WITHOUT A PERSONAL CONTRIBUTION... IS IT POSSIBLE?

A few years ago, when buying a home, it was impossible to apply for a mortgage from a bank without providing a deposit of 10 to 15 per cent of the amount borrowed. Nowadays, in France, it is not uncommon for some banks to offer mortgages covering 100 per cent, or even 110 per cent, of the property’s value, enabling prospective homeowners with no personal savings to embark on the journey to home ownership.

What is a deposit?

It is the sum of money a buyer has available to finance part of their property purchase, with the bank loan covering the remainder of the purchase price. This deposit comes from personal savings – the most common source – an inheritance, the sale of another property, or a home savings account.

Certain loans may also be considered as a personal contribution: the enhanced zero-interest loan, the 1% housing loan, the civil servant loan, etc.

The personal deposit often covers the notary fees (around 3% for the purchase of a new-build property and approximately 7% for an older property).

Banks generally require a deposit of 10 to 20%. This reduces the risk of a loan not being repaid and allows them to offer more favourable loan terms (term, interest rate).

It is important to note that the larger the loan amount, the longer the repayment term and the higher the cost of borrowing.

No deposit: being young and providing more guarantees

Nowadays, banks are taking more risks and granting loans to people without a personal deposit but with solid guarantees. They will seek to assess the customer’s risk profile, their ability to repay the loan and the likelihood of default.

The following factors are taken into account:

• the level and regularity of income;
• savings capacity;
• job stability;
• the number of dependants;
• marital status;
• level of debt (it is rare for a bank to agree to grant a loan when the debt-to-income ratio exceeds 30%)

Most of the products offered by banks are aimed at young investors.

Bankers therefore look at:

• age;
• income;

and, above all, potential for growth.

For anyone over 40 with no deposit, banks are more reluctant, unless they have developed specific products for older people

The key figure: the debt-to-income ratio

A banker who doesn’t want to take a risk by lending money to a particularly vulnerable applicant will have nothing but these words to say. For them, total repayments must not exceed 33% of your salary. The one-third rule applies regardless of which financial institution you approach.

If you’ve passed this stage, well done – there’s still a long way to go, but at least you’re well on your way.

What the bank looks at: risk

At least bankers don’t spring any surprises on us. We know how they operate, and they all act in much the same way.

Your advisor, to avoid getting a telling-off, will try to ensure their institution takes as little risk as possible. Otherwise, they know full well that at the slightest repayment problem, the file will come back to their desk like a boomerang.
In other words, if you’re on income support, they won’t literally slam the door in your face, but it’s much the same thing.

Going it alone: yes, but be careful

If you earn enough to take out a loan, all the better. But you must remain vigilant about your disposable income. We’re not talking here about the years you have left on this earth, but the amount left in your account at the end of the month.

This must be enough to cover all your household’s essential expenses: rent, electricity, gas, telephone, as well as medical care, food, children’s school fees, not to mention all the little extras. If you have to go without holidays for 25 years, that’s not the best solution.

The conditions for a bank to say yes

Borrowers looking to buy a home always eagerly await those three letters, much like a bride and groom at the altar. Taking out a long-term loan is a bit like marrying your bank.

In any case, bear in mind that if you have a decent deposit, a permanent contract, not too much debt, good financial management and a willingness to cooperate, your application should go through, provided you aren’t aiming to buy beyond your means.