Buy-to-let investment
Buying to house your student child: what structure will the bank finance?
A lent property, a tenancy, a shared residence or a purchase in the child’s name: the structure the bank will finance, and the post-studies plan.
Four structures exist, and the bank does not read them in the same way. A property lent to the child brings no income to the application; a rent paid by the child is rarely taken into account in full; a shared residence with third parties brings in actual rents, weighted accordingly; a purchase in the child's name relies on the commitment of the parents, as co-borrowers or guarantors. The loan will last longer than the studies.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- Four structures exist — a property lent out, a tenancy with the child, a shared residence, a purchase in the child's name — and each is financed differently.
- A property lent out free of charge brings no income to the application: the full instalment is added to the household's expenses.
- The rent paid by the child is rarely taken into account for its full amount, unless there is a written tenancy agreement, a market rent and regular transfers.
- A shared residence with third parties brings in actual rents into the application; each vacant room remains a risk that the analyst weighs up.
- The loan lasts longer than the studies: write down from the outset what happens to the property after the degree is obtained.
Buying your student child’s home rather than paying their rent is possible: choose the structure before the property. Each is financed differently. A guide to the buy-to-let investment application.
Four structures: which your application can support
Lend the home, rent it to your child, rent it out in shared accommodation with other students, or have your child buy it with your help. The structure determines the size, the budget and the application.
| Structure | What the bank counts as income | What it counts as outgoings |
|---|---|---|
| Home lent to the child | Nothing | The full instalment, plus your current loans |
| Lease signed with the child | Often nothing, sometimes a weighted rent if payment is proven | The full instalment |
| Shared accommodation with third parties | The rents of the housemates, weighted, with proof | The full instalment |
| Purchase in the child’s name | The child’s income, if they have any; yours if you are co-borrowers | The instalment, and your guarantee commitment where applicable |
Le loyer que vous cessez de payer pour votre enfant n'est pas un revenu : c'est une dépense en moins, que la plupart des établissements ne comptent pas dans le calcul. Il améliore votre budget réel, pas votre taux d'endettement.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
Home lent: simple, if the debt-to-income ratio allows
Without a lease, it is a second home: one more instalment, with no income, that your debt-to-income ratio must bear. Prepare the answer to ‘after the studies?’: ‘it will be rented out’ is better than silence.
Renting to your child: a rental income rarely accepted
Many banks disregard a rent that is, in practice, paid by you. Others accept it provided there is a written tenancy agreement, a market-rate rent and regular bank transfers (tenancy agreement: notary or ANIL). This must be validated by a financial professional:
- the rent becomes taxable property income;
- housing benefit is not payable when a parent owns the property, unless an exception is confirmed with the paying authority;
- a rent significantly below market value weakens the entire application.
Shared accommodation: the other tenants’ rents are included in the file
This is a rental investment: estimated rents are then weighted, with vacancy taken into account (summer for all), and co-ownership allowing the use. In Lyon and Villeurbanne, request the rules on rent per room from the town hall. See rental income and rental property in Lyon.
Buying in the child’s name: their asset, your commitment
Without income, they borrow with you, as co-borrowers or with guarantees.
- Co-borrowing commits you to the entire debt.
- The contribution towards the deposit is a gift: to be decided with a notary, especially if there are other children.
- The family real estate company involves everyone, at the cost of more complex management.
Near the Lyon campuses: a property easy to re-let
La Doua, Gerland, La Manufacture, Rockefeller, Bron, Écully: aim for the metro or tramway. The two-room flat also serves after studies.
After the degree: preparing for the purchase
Studies last a few years; the loan, far longer.
Pour des parents, la durée réellement accessible dépend aussi de l'âge en fin de prêt, que chaque établissement et chaque assureur apprécient à leur manière. L'assurance emprunteur pèse davantage à mesure que l'âge avance.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
Compare the cost without return (fees, interest, insurance, charges, council tax) with the rent avoided. A quick resale incurs early repayment charges.
Before the viewings: five points
- Your debt-to-income ratio without any rent, including any ongoing loans.
- Shared accommodation tested, with rents estimated prudently.
- Term and insurance aligned with your age at the end of the loan.
- The post-study period written into the file.
- Your questions for the solicitor and the accountant.
I am a mortgage intermediary working under mandate; I do not provide tax advice (fees, documents to gather). Compare each structure with your file by telephone.
Create your file as early as the spring preceding the start of the academic year.
Sources
Read next
- How much can I borrow? Mortgage capacity in Lyon
- Investing in LMNP: financing a furnished property, and what the bank actually considers LMNP financing: the same loan as unfurnished letting, but furniture is excluded from the loan, rents must be proven, and the tax return is scrutinised.
- Financing a rental investment in Lyon: what the bank actually looks at Financing a rental investment in Lyon: the rent the bank takes into account, the expected down payment, the mode of operation and the structure that holds up.
- Donation from parents for the down payment: ensuring the gift is recognised without delaying the application Family gift for the down payment: documents proving the origin of funds, what must be declared, and what to ask the notary before the transfer.
- Financing a purchase through an SCI, under IR or IS: what the bank truly requires Mortgage through an SCI: partners’ joint guarantee, debt-to-income ratio, current-account contribution, security. What secures the deal, under IR or IS.
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