Buy-to-let investment
Financing a fourth rental investment: why the bank stops, and how to proceed
Refusal at the third or fourth rental investment: what is truly blocking the bank, and the levers that restart the financing, in the right order.
No text limits the number of mortgage loans: at the fourth property, the bank stops because the cumulative outstanding amount with it exceeds the branch's delegation, because the risk is concentrated on the same borrower, and because the derogatory margin is rationed. The continuation is financed by changing institution in the right order, by asserting the actual rental history, or by restructuring the existing loans.
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
- No text limits the number of mortgage loans: what blocks is the cumulative outstanding amount with the same lender.
- Beyond a certain outstanding amount, the file leaves the branch for the regional headquarters, where risk concentration takes precedence over the debt-to-income ratio.
- The HCSF derogatory margin is counted per quarter and goes first to primary residences: the investor only has a fraction of it.
- Changing bank means changing the calculation method: applying in order, and not everywhere at once, keeps doors open.
- The guarantees already taken on existing properties can block a new file, even when the borrowing capacity is sufficient.
For the fourth property, the refusal does not stem from your application: it stems from your outstanding balance with the bank, the branch’s delegation of authority, and a rationed derogatory margin. Here is the lever for each blockage, in order. This is the least documented stage of an investor’s journey; the basic calculation is in rental income and debt-to-income ratio.
Why the bank refuses the fourth property when the application improves
The decision concerns your outstanding balance with the bank. Beyond a cumulative amount, the application is referred to a committee, and it is the concentration of risk that decides.
- The branch’s delegation of authority is capped: above that threshold, your contact person no longer decides.
- The risk is correlated: four properties in the same urban area react together to a shock.
- The derogatory margin is rationed, each quarter.
Ce n'est pas un droit individuel. Un dossier n'en « bénéficie » jamais : il est, au mieux, éligible à être logé dans cette marge, à la main de l'établissement.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 2 — Légifrance
Most of this margin goes to the primary residence. An investor only has access to the free portion:
Cette part se compte sur la marge de flexibilité, elle-même comptée sur la production du trimestre. C'est donc une fraction d'une fraction.
- En vigueur depuis le
- Source
- Légifrance
It allows derogation from the debt-to-income ratio limit itself (detail: the debt-to-income ratio and the margin):
Déroger n'est pas dépasser librement : c'est loger un dossier dans une enveloppe comptée, à la main de l'établissement et sans droit acquis pour l'emprunteur.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
Do not submit at the end of the quarter: the reserve is empty.
A tightening residual income
The analyst adds provisions for works, a simultaneous vacancy and the tax on rental income, including social contributions. Integrate this into your forecast yourself.
How many property loans can be combined?
No text sets a maximum number. What is combined with a lender is outstanding balances, guarantees and risk lines.
The ‘wall’ arrives when the outstanding balance reaches the branch’s delegation: earlier for a large transaction. Declare everything, including a guarantee for a company: an omission weighs more heavily than the commitment. And a property already mortgaged no longer offers security.
The levers that restart financing
From the least costly to the most binding:
- Change of institution, and therefore of calculation method. Some banks reason in terms of transaction balance. Submit in order, the most favourable grid first, never everywhere at once.
- Let the rental history speak. Three years of management statements allow you to contest the flat-rate deduction on your rents.
- Change the type of loan: the bullet loan or the specialised lenders.
- Restructure the existing: renegotiate or buy out the property loans (see loan renegotiation), or sell the least performing property to release outstanding balance and guarantee. A consolidation including consumer credits is another transaction, described in the article on credit consolidation.
- Switch to a company: the guarantee of the partners moves the outstanding balance without erasing it. See the SCI under IR or IS.
Domiciliation: in writing, and keep a bank with no outstanding balance
Domiciliation only exists if it is written in the loan offer. On a multi-property application, it still concentrates the outstanding balance with a single lender.
Keep at least one institution with no credit, with savings and an impeccable account, for the next application.
Borrower insurance, the fastest lever on borrowing capacity
On four loans, insurance becomes a component of the debt-to-income ratio. Reviewing it is often the fastest way to regain borrowing capacity.
- Allocate the shares together.
- Choose investor guarantees: see insurance for a rental investment.
- Measure the gain: a lower instalment on the debt-to-income ratio.
Insurance intermediation is exercised on an ancillary basis: this section is not an offer.
The application that convinces a committee fits on one page
| Column to include | Document that justifies it | What the analyst deduces |
|---|---|---|
| Property, address, typology | Title deed or deed | Geographic distribution and diversification |
| Acquisition date | Sale deed | Seniority of the investor experience |
| Monthly rent received | Lease and receipts or management statement | Actual income, enforceable against the flat-rate deduction |
| Non-recoverable charges and council tax | Itemised service charge statement, tax assessment | Actual cost, often lower than the standard assumption |
| Instalment, insurance included | Amortisation schedule | Exact commitment, without approximation |
| Outstanding capital and final maturity | Amortisation schedule | Outstanding balance and repayment horizon |
| Monthly net cash flow of the operation | Result of the previous lines | Self-financing property by property |
Add a statement of intent (objective, horizon, exit) and a stress scenario: two properties vacant for three months at the same time. For the total cost: purchase costs.
A refusal leaves a trace. Have the order of deposits established by telephone, with the table in hand.
Create your application and present your assets on one page.
Regroupement de crédits
Un regroupement de crédits dont la part des crédits immobiliers ne dépasse pas 60 % du montant total de l’opération relève du crédit à la consommation (C. consom., art. L. 314-10, L. 314-11 et R. 314-18). Le code impose alors la mention suivante sur sa publicité :
Un crédit vous engage et doit être remboursé. Vérifiez vos capacités de remboursement avant de vous engager
Sources
Read next
- How much can I borrow? Mortgage capacity in Lyon
- Rental income: how the bank calculates your debt-to-income ratio as an investor Weighting of rents, classical or differential method, disposable income: why two banks calculate an investor's capacity differently.
- 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.
- Buying a rental property: building a file the bank can read A rental property is financed through a mortgage and assessed as an asset: tenancy status, technical condition, cash flow. The documents that decide.
- Mortgage insurance for a rental investment: which coverages to reduce and which to keep For rental properties: the cover the lender really requires, what can be reduced, the cumulative-limit trap, and the case of a property company (SCI).
All articles on this topic: Buy-to-let investment
Passer au calcul : Borrowing capacity