The numbers are clear: from one bank to another, the consideration of rental income can vary from one extreme to the other, and it is not the Banque de France that will set the rules. Each institution draws its own line, sometimes to the benefit of the borrower, sometimes not. For multi-property investors, the choice of bank becomes crucial; one calculation method can open all doors, while another can close them immediately.
This wide gap in practices explains why some files, deemed solid here, are rejected there. The calculation method directly influences the displayed debt ratio. For those who already own several properties, the difference is not marginal: it determines the very feasibility of a real estate project.
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The differential calculation in real estate credit: understanding its principle and stakes
The differential calculation has long been seen as a key for investors. How does it work? One subtracts the rental income from the loan installments related to a rental property. As a result, only the “remaining charge” is taken into account to determine the debt ratio. This approach was appealing: it valued the profitability of a rental investment and often displayed a debt ratio well below that obtained by the classic method. Even better, the cash flow, this net difference between rents, generally reduced to 70% for prudence, and expenses, became an asset for securing new financing, even with an already substantial portfolio.
But since January 2022, the landscape has changed. The HCSF (High Council for Financial Stability) requires all banks to switch to the classic method: all charges, including loans, are added together and then divided by all income, including 70% of rents. The borrower’s insurance is no longer an optional item; it is systematically included in the calculation. Behind this evolution lies a desire to avoid over-indebtedness situations and to strengthen the solidity of French banks.
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This shift is far from trivial for investors. The debt ratio limit is now set at 35%, including insurance. While the calculation method aims to be more homogeneous among banks, differences remain depending on how each institution treats rental income or the legal structure of the investment. Some setups, such as SCI taxed under corporate tax, professional loans in particular, are sometimes treated separately, but these cases concern only a minority.
For those wishing to scrutinize current banking practices, the Finance Factory website analyzes the criteria used by each institution. It is no longer just a matter of pure technique; the way of calculating engages access to credit, influences wealth strategy, and weighs on the regulation of the sector.
Which banks still apply the differential calculation and according to what criteria?
Since the decision of the HCSF, almost all banks have abandoned the differential calculation to comply with the classic method. This applies to both real estate loans for primary residences and those intended for rental investment. Now, the rule of 35% debt ratio, including insurance, prevails. Rents are only counted at 70% in the calculation, and not more.
Exceptions remain, but they often relate to specific legal structures. Some SCIs taxed under corporate tax, family SARLs, or structures under the LMP (professional furnished rental) regime may still qualify for professional financing partially escaping the constraints of the HCSF. In this context, a few banks, often regional or mutual, agree to examine the cash flow and the remaining living expenses on a case-by-case basis, especially for files with strong self-financing potential.
The credit access policy thus varies according to the region, the targeted clientele, and the institution’s appetite for rental real estate. In Paris or Lyon, the rule is applied strictly, but in the regions, some agencies still accept to analyze a rental real estate project in SCI from the differential perspective, especially if it concerns a professional loan. The structuring of the file, the quality of the contribution, and the structure of the assets weigh in the decision, sometimes more than the calculation method itself.
Experienced investors do not hesitate to explore these solutions to bypass the regulatory barrier. However, it remains essential to choose the tax regime wisely, to carefully draft the statutes, and to present the application: these details can make all the difference in obtaining financing outside the classic framework set by the financial stability council.
Concrete impacts for borrowers: comparison of practices and consequences on borrowing capacity
The elimination of the differential calculation profoundly changes the conditions for accessing real estate credit, whether one is an experienced investor or a first-time buyer. Previously, each rental investment was isolated: only the installments not covered by the rents were included in the calculation of the debt ratio. This system favored the accumulation of properties, provided a positive cash flow was ensured. With the classic method, the flexibility is gone: all charges and loans are added together, only 70% of rental income is included, and the borrower’s insurance now weighs in the balance.
This upheaval significantly reduces borrowing capacity, especially for those aiming to build a substantial real estate portfolio. Let’s take a concrete case: an investor owning several properties that were previously well self-financed had a debt ratio below 20%. Today, for the same profile, the 35% threshold is quickly crossed, closing the door to new projects.
Industry professionals, brokers in particular, observe a scarcity of financing without personal contribution. Strategies are adapting: contracts for borrower’s insurance are compared precisely (notably thanks to the Lemoine law), legal structures are refined, and some turn to professional financing to circumvent the requirements of the financial stability council. Exceptions remain limited to 20% of files, with a clear advantage for first-time buyers or well-structured files.
Here, in summary, are the major differences between the two methods:
- Classic method: weighting of rental income at 70%, inclusion of all charges
- Differential calculation: consideration of positive cash flow, higher borrowing capacity
- Impact: net decrease in debt capacity, increased selectivity of banks
The landscape of real estate credit leaves no room for improvisation. For investors, every decision matters, and sometimes, the margin for maneuver depends on a line in the contract. Who will know how to take advantage of these new rules? The game has only just begun.