Tahminae Madani of France Home Finance comments on :
The French banks have been having the last laugh all year long. As many of their contemporaries around the world are going bankrupt due to over eager lending policies, French banks are in good shape. Why is this? It all boils down to the basic rule for obtaining a mortgage in France : your total monthly debts including your new mortgage must not exceed more than one third of your regular monthly income. This is the legally imposed guide that French banks live by and it has served them well. This is also the reason French banks ask for full documentation on file to justify debts and revenues declared for the “debt ratio” calculation. They have regular audits by the Banque de France and can lose their banking license if they can’t back up their lending methods. This method has been much criticized in the past by clients used to home country lending methods that use a simple credit bureau check or even a self certification. Believe me, as mortgage brokers, we would prefer the French system lighten up. We will say however that when put to the ultimate test, the French method has passed.
So much so that we even have some bank partners widening their lending criteria in the midst of the global crisis. We received a new product this week offering 100% mortgages for existing properties, good through the end of the year, and are now able to provide refinance or cash out on French properties for up to 80% of property value. This is great news for investors. A non-resident client stopped by this afternoon to look into financing his second Paris studio apartment as he continues to build up his retirement portfolio. The apartment he purchased last year has been filled with short term rentals 80% of the year. There is clearly a credit crunch going on in the world but our advice is - in times of uncertainly – stick to sound investments backed up by stable country infrastructures. France wins on all counts.
