A non-resident's borrowing capacity: the calculation the bank makes

The first question every non-resident buyer asks is “how much can I borrow?”, and the answer they give themselves is almost always too high. Not because their arithmetic is wrong, but because they calculate like a resident, on gross income at the day’s exchange rate. The bank does not read your income: it reads what is left of it after three successive filters. This guide walks through them in order, with a worked example, so that the figure you quote to a seller is the one the bank will sign.

It complements our reference page on mortgages for non-residents, which sets out the whole process.

First filter: conversion, then the discount

Your income is converted into euros at the rate on the day of the review. Nothing surprising so far. Then the bank applies a discount, meaning it keeps only a fraction of that euro value, to protect itself against a fall in your currency over the whole life of the loan. This discount is an internal practice, not a legal rule: it runs from 10 % for a stable currency such as the Swiss franc to 30 % for a volatile one, and each institution has its own grid.

It is the harshest filter because it is invisible. A salary worth 7,000 euros once converted enters the calculation at only 5,600 euros with a 20 % discount. Everything that follows is calculated on that last figure.

Second filter: the 35 % debt-service ratio

Since 1 January 2022, the decision of the High Council for Financial Stability imposes on banks a maximum debt-service ratio of 35 %, loan insurance included. The rule applies to every borrower, resident or not. The calculation is simple: the sum of all your credit charges may not exceed 35 % of your retained net income.

The word that matters is “all”. The total includes: the instalment of the loan requested, its insurance, your existing loans in your country of residence converted into euros, rent if you are a tenant, maintenance you pay. A mortgage on your home in London or Geneva weighs in the calculation exactly as if it were French.

Back to the example. Income retained after discount: 5,600 euros. Charge ceiling: 35 %, so 1,960 euros a month. You already repay 400 euros on a car loan: 1,560 euros a month remain for the new loan, insurance included. If the insurance represents 160 euros, the loan instalment proper is capped at 1,400 euros. That figure, and it alone, is what the loan instalment simulator converts into capital according to the term and the rate of the day.

Third filter: residual income

The debt-service ratio is a regulatory ceiling; residual income is a banking floor. After all credit charges are paid, a sum judged sufficient to live on must remain each month, and that sum depends on the make-up of the household and on the cost of living in the country of residence. A family of four in Singapore or New York is assigned a far higher residual income than a single person in Lisbon.

This is where comfortable income sometimes yields a disappointing capacity: the discount has reduced the income, the ratio has capped the charges, and residual income, calculated on a high cost of living, eats what margin was left.

What moves the result

Three levers act on the final figure, in this order of effectiveness.

1. Repay existing loans before filing. Every euro of instalment removed frees a euro of capacity, with no discount and no condition.
2. Increase the down payment. It does not change the ratio, but it reduces the capital to borrow, hence the instalment, hence the pressure on the ceiling. It is also what the bank looks at first in a non-resident.
3. Have your income read by the right institution. The discount is not the same everywhere: a French subsidiary of a bank from your home country often reads your currency without punishing it. That is precisely what a partner broker knows, and what justifies their fee.

Extending the term is the lever people think of first and the least reliable: the rule allows 25 years, but many institutions cap a non-resident at 20, and all run into the age at the end of the loan.

What this calculation does not say

Borrowing capacity is not a loan approval. It says what the bank can lend, not what it wants to lend. Between the two sit the institution’s appetite for your country of residence, the quality of the security it can take, the insurance it will find for you and, above all, the legibility of your file. Our guide on loan refusals and how to correct them details what brings down a file whose capacity was nonetheless sufficient, and the one on the security for the loan what the bank will take as collateral.

Finally, the result depends on the country where you live far more than on your nationality: that is the subject of our guide to mortgages by country of residence.

To set out your project and have it read by a partner broker used to your country, the complimentary personal study is the starting point.