By making some comparisons with the stock market, the real estate sector continues to attract more and more individuals. There is no need to wonder why investing in real estate is so interesting. The activity is not only less risky, but it also provides a high return.
However, it must be admitted that the realization of the project requires large expenses due to the expensive cost of a property.
To finance the acquisition, most future owners are forced to resort to a mortgage loan. Even if they have already well prepared their application file, the lending institution refuses to grant them a mortgage credit.
Before providing you with solutions adapted to this problem, it is appropriate to summarize the reasons for a bank refusal.
What are the causes of a mortgage loan rejection?
Before granting or refusing a loan, the financial institution carefully studies your loan application file. Moreover, it imposes many requirements to check your repayment capacity.
The first element to check applies to your professional situation. If this appears unstable to them, they have the right to refuse your application. The bank gives an advantage to tenured civil servants or employees on permanent contracts. According to them, they present good financial stability.
The second parameter relates to a high debt ratio. The lending institution closely examines your financial income. When the monthly repayments exceed 35 % of your income, it does not hesitate to say no to the loan. The debt ratio must be less than 35 %.
The bank also makes this decision when it observes poor management of your finances. The same applies in the case of lack of collateral.
Also, many financial institutions refuse to lend you money when you do not subscribe to a borrower’s insurance.
Although this is not a legal obligation, this procedure is strongly requested. For more info, consult our article: when and how to subscribe to home insurance?
What recourse in case of mortgage loan refusal?
Even if the bank rejects your loan application, it is still possible to find a solution to the problem.
However, when you are listed at the Bank of France, there is no way to resolve the issue. It is the same when you are affiliated with the File of Repayment Incidents of Personal Loans or FICP.
| Possible recourse | Description |
|---|---|
| Ask for reasons of refusal | Request a written explanation from the bank to understand the reasons. |
| Improve your file | Reduce your debts, increase your down payment, or stabilize your professional situation. |
| Consult a broker | A broker can guide you to institutions better suited to your profile. |
| Change banking institution | Each bank has its own criteria: try your luck elsewhere. |
| Wait and rebuild your profile | Take a few months to improve your financial situation before reapplying. |
| Contest the refusal (rare cases) | If you consider the refusal unjustified, you can contact the banking mediator. |
| Opt for an assisted or alternative loan | Explore zero-interest loans, employer loans, or crowdfunding solutions. |
If this is not your case, you can very well look for solutions to get a mortgage loan. If one institution has not accepted your loan application, you can turn to another financial institution. Do not hesitate to multiply your requests to increase your chances.
It is also possible to wait for months and then revise the file to make a new request. You need to review the blocking elements that lead to the bank’s refusal.
Otherwise, consider improving the financing plan before submitting another application. Why not choose a less expensive property or extend the repayment period.
If you lack ideas, call on a real estate advisor or a broker who will give you advice to improve your file. The professional can also present it to different lending institutions.
Which bank lends most easily if you have had bank refusals?
As mentioned above, you can turn to other institutions when a bank says no to your loan request.
Some institutions ease their requirements to grant a loan. The national generalist banks such as BNP Paribas, CIC, LCL, and La Banque Postale are among the best known.
Similarly, regional local banks and insurers do not complicate the procedures to finance a real estate project.
Some online banks such as Hello Bank, Boursorama Banque, and BForBank make things easier for you. There are also financial institutions specializing in credit such as Crédit Foncier and Cetelem.
How to convince banks for a mortgage loan?
Repayment capacity is among the key points that influence the bank’s decision. If you want to persuade it for a loan, do not hesitate to improve it.
Sometimes, an individual earns 1,500 euros in income each month and plans to borrow up to 50,000 euros to buy a new car. In this circumstance, it is normal for the financial institution to take no risk.
To avoid this situation, make sure your project is consistent with your financial possibility. Otherwise, reduce your monthly payment by extending the loan duration.
That said, many elements will be studied by the bank when it examines your file. If you plan to convince it, think about improving them.
Your income, your job, your banking management, your debt capacity, and the amount at your disposal are the tools to perfect.
Why do banks refuse almost half of loan applications in 2022?
If you want to apply for a mortgage loan, it must be said that the year 2022 does not seem to be the best period.
Recently, it has been observed that more and more loan applications are rejected by the bank. Even if the file may seem solid, individuals sometimes receive negative responses.
According to specialists, it is the usury rate that explains this situation. In a word, it is a ceiling rate at which the financial institution can lend money.
It can also be interpreted as the maximum Annual Percentage Rate (APR) that the bank cannot exceed. This includes the insurance rate, the nominal rate, application fees, brokerage fees, and guarantee fees.
When these exceed the usury rate, the loan is thereby classified as usurious or even illegal.
This indicator was created in 2008 with the aim of protecting individuals from over-indebtedness. The Bank of France is responsible for the calculation. Fortunately, everything has been resolved since October 2022, as the calculation has been revised.
How to obtain a mortgage loan in 2023?
- Impact of the usury rate: Due to the usury rate, thousands of French households no longer have access to mortgage credit. Yet, it allows them to finally realize their lifelong project.
- Mobilization of professionals: To protect households, several professionals are calling for an amendment to the system.
- Revision of the calculation: Others are requesting a modification of the calculation method. Some, meanwhile, are asking for the usury rate to be revised monthly, rather than every three months.
- Parliamentary support: Fortunately, parliamentarians are not ignoring their expectations. They are planning a reform of the 2023 finance law.
- Hope for individuals: There is therefore a strong chance that ordinary individuals will benefit from a mortgage loan in 2023.
If you have not subscribed to loan insurance, it is time to do so. This maximizes your chance of obtaining a mortgage loan. Otherwise, it is necessary to improve your financing method.
When your financial situation proves unstable, the bank does not take the risk of granting you credit. It also applies this decision when your project does not seem solid to it.
You can go to another financial institution to submit a new application. Also, contact brokers and they will know how to act to persuade the institution to grant a mortgage loan.
