Borrowing capacity, income and budget
Net take-home, net payable, gross: which income does the bank actually use?
Net payable, gross, taxable, bonuses, dividends, rents: what the bank actually uses to calculate your borrowing capacity, before you start house-hunting.
The bank uses the net payable before tax, increased by regular and contractual elements: neither the gross, nor the net taxable, nor the net transferred after withholding tax. Income written into the contract is taken into account in full, variable income is taken into account after averaging over several years, expense allowances and profit-sharing are excluded. No legal rule sets this list: each institution has its own.
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
- The basis of the calculation is the net payable before tax, never the gross, the net taxable or the net actually transferred after withholding.
- Three treatments exist: an income taken into account is included in full, a weighted income is included after averaging, an excluded income is not counted.
- What is written in the contract or the collective agreement is included in the calculation; what depends on an annual decision by the employer is not included.
- Expense allowances, profit-sharing and participation are excluded: they compensate for an expense or remain uncertain.
- No legal rule sets the list of admissible incomes or their weighting: each institution applies its own risk policy.
The bank calculates your capacity based on the net pay before tax, plus regular and contractual elements. Classify your income and estimate your loan capacity calculation before visiting.
Which income does the bank take into account: net, gross or taxable?
The net pay before tax, plus regular and contractual elements. Neither the gross, nor the taxable net, nor the net paid.
| Payslip line | What it is used for | Role in a credit application |
|---|---|---|
| Gross salary | Basis for calculating contributions | None. It is never taken into account |
| Social net | Declaration to benefit agencies | None |
| Taxable net | Basis for income tax | Consistency check with the tax assessment |
| Net pay before tax | What the employer owes you | The basis of the calculation |
| Net paid | What arrives in the account | Verification, on the statements |
The withholding tax is treated as an expense, just like a rent.
Taken into account, weighted or excluded: classify each income
Taken into account: it is included in full. Weighted: after averaging or a deduction. Excluded: it does not count.
| Nature of income | Usual treatment | What causes it to be reclassified |
|---|---|---|
| Fixed salary, confirmed permanent contract | Retained | Length of service and probationary period |
| Permanent contract during probationary period | Excluded until confirmation | Letter confirming the end of the probationary period |
| Fixed-term contract, temporary agency work, casual work | Weighted | Continuity of history and sector |
| Thirteenth month, contractual bonus | Retained, annualised | Contractual nature, written down in black and white |
| Variable pay, bonus, commissions | Weighted, based on multi-year average | Age of the scheme and stability of amounts |
| Overtime hours | Weighted if regular, excluded otherwise | Regularity over several years, not over a quarter |
| Profit-sharing, participation, exceptional bonus | Excluded | Nothing: their unpredictable nature is disqualifying |
| Meal, transport, and long-distance travel allowances | Excluded | Nothing: they compensate an expense |
| Benefits in kind | Excluded from income | They remain considered in the analysis of the cost of living |
| Manager remuneration, non-employee income | Weighted, based on accounting years | Number of balance sheets and their trend |
| Dividends | Weighted, under strict conditions | Regularity, and the company's ability to pay them |
| Rental income | Weighted, variable method | Lease, vacancy, and tax regime |
| Pension payments | Retained | Residual duration, by definition long |
| Child benefit received | Weighted | Court order and age of the children |
| Child benefit paid | Counted as an expense | Nothing: it is an expense, not a reduction of income |
| Family allowances | Weighted or excluded | Duration for which they will continue to be paid |
| Unemployment benefits, social minimums | Excluded | Their temporary nature |
| Investment income | Excluded from income | They count as assets, not as resources |
- Bonuses: if written into the contract, they are included. An old bonus without a contract can be defended, supported by December payslips.
- Variable pay: average over several accounting years; stability is worth more than the level. See self-employed workers.
- Overtime hours: if attested over several years, they can be defended (civil servants). Expense allowances are not income.
- Dividends: the lender assesses the health of the company and the regularity of distributions (liberal professions).
- Rents: grossed up according to the method of each lender (rental income). Allowances that will soon cease do not finance a long-term loan.
Two banks, two retained incomes: have them compared
The regulations cap the debt-to-income ratio, not the method. Each bank chooses its admissible incomes.
La norme porte sur le rapport entre charges de crédit et revenus. Elle ne définit pas la liste des revenus admissibles : c'est la politique de chaque établissement qui la fixe.
- En vigueur depuis le
- Source
- Décision D-HCSF-2021-7, art. 1er — Légifrance
For a composite income (fixed, variable, rental), the difference between banks becomes determinant. See the rule of the High Council, why two banks respond differently and the specialised lenders.
Over how many years of income is the average calculated?
Over several, depending on the bank and the income. The best year is rarely retained.
- Track record: long-standing and regular, an income counts almost as a fixed one.
- Stability: very irregular, it is retained at the lowest level.
- Horizon: an increase must be proven in writing; if announced orally, it carries no weight.
Provide recent payslips. The order of examination: what the bank looks at, and in what order.
Have your irregular incomes retained
- Provide the written evidence: contract, addendum, commission plan.
- Show the entire history, including bad years.
- State the income that you can prove, not the most flattering one.
Then: first purchase and capacity, atypical profiles, the formula for the instalment, the purchase costs.
Bonuses or rents to include? Create your file or have your retained income calculated by telephone.
Sources
Read next
- How much can I borrow? Mortgage capacity in Lyon
- Bonuses, commissions, variable pay: how do you get the bank to count them? A bonus or a commission counts if it is written down, regular and proven over several years. The documents to gather and the table to prepare.
- How much can I borrow with €2,000 per month? With €2,000 in monthly income: a step-by-step calculation of your borrowing capacity, the bank’s three constraints and five levers to increase it.
- Mortgage for self-employed professionals or micro-entrepreneurs: two or three financial statements to borrow? Years in business, micro-business deduction, salary or dividends, irregular income: what the bank actually considers, and how to prepare your file.
- 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.
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