The Income Rule – 33%

Carole Bayliss talks to Box 424.com in her regular feature on mortgages.

There is a very simple, but very strict ruling about how much of their monthly income a person can use to repay any borrowings, and of course that has to include the cost of the French mortgage and the life assurance that goes with it as well. These regulations are laid down by the Banque de France and every bank and mortgage provider in France adheres to these rules without exception.

I’ll explain the way the calculation is worked out, so if you have pen and paper handy, and maybe a calculator, we’ll work through it step by step…..

Some people are confused as to whether monthly income means before tax or after tax.
It is before tax, but for people who are living and working in France and paying to the French tax authorities, they should deduct their social charges which are higher than many other countries.

Only one third of your monthly income can be used to service any existing mortgage or rent, any other mortgages and loans, monthly credit card repayments if these are not cleared totally each month, and if applicable, any maintenance payments for a child or to an ex-spouse

What is left can be used to service the monthly cost of the French mortgage.

If two or more people are applying for a joint mortgage, then all their incomes and outgoings should be included.

If a person has other income, say from freelance work or investment income, then that can be taken into consideration, but only if it is declared to the tax man. People who own their own businesses, limited companies, may opt