The financing

plan and the

structuring of
the real estate
loan
Financing plan
• Once all the expenses have been taken into account, a financing plan will be drawn up. It will consist of three parts:
 The credits granted plus those in progress
 Bonuses
 The personal contribution: the analysis of this item is rich in terms of risk study and determination of the applicant's ability to
meet his repayments. Are these funds the result of a savings effort or do they come from the family? savings come from the sale
of an asset?
The question is how the borrower has built up his or her savings. This allows a risk profile to be established.
Effective overall rate
Banks must present their loan rates in the form of the Total Effective Rate (TEG)
Why?
To present a common reference to facilitate comparison but also to facilitate control by the control bodies to avoid usury
To go futher in the analysis
• What Is Usury?
Usury is the act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law. Usury first
became common in England under King Henry VIII and originally pertained to charging any amount of interest on loaned funds. Over time it evolved
to mean charging excess interest, but in some religions and parts of the world charging any interest is considered illegal
Determination of debt capacity

The determination of debt capacity is mandatory for granting credit. A certain level of indebtedness must not be exceeded (on average 30%).
This calculation depends on what is included in the resources and expenses and the type of calculation.
 Resources must include all income. A common rule is applied: the amounts must be stable over the duration of the credit, in particular bonuses,
income from renting a flat, social benefits....
 Expenses consist of outstanding credits. The integration of the instalments in the calculation of the charges must take into account the remaining
duration of the credit. The probability of a loan rollover (leasing), credit indexation, the existence of permanent credit that it is advisable to take into
consideration to the maximum extent
 In the case of alimony payments, the calculation will be made either by deduction from income or by inclusion in expenses.
 Income tax : is not included in the expenses, if we include this variable then the rate of income will increase

• There are two methods that are the classic methods for determining the debt ratio for home loan. (voir pdf découverte besoiin de l’emprunteur)
1- Effort rate method
2- The available income method
The first is determined by the ratio of expenses to income. The limit is between 30% and 35% in general. This is the fastest and most common method
Determination of debt capacity

 The second method, disposable income, is used alone or as a complement to the first method. This method determines the
disposable income of the household. It can take into account the number of dependants.

 The formula is: total income - total expenses / number of people living in the household

 Some of the legislator's directives require banks to increase the process of estimating the solvency of borrowers. Banks must
incorporate more prudent scenarios into their models. Banks must project the evolution of borrowers' ability to repay in relation
to their disposable income.
Example of recommendations: keep all the documents that resulted in the agreement of the credit, maintain an archive until the end
of the credit and identify fraudulent information.
Banks should take into account possible negative scenarios in the allocation of provisions, such as a drop in income at retirement, an
increase in interest rates....
• Modality of actions in case of non-payment.
It is necessary to focus on the early detection of payment difficulties, the bank must assist and cooperate with the
borrower
As soon as the first warning signs appear, the bank must contact the borrower to analyze the reasons for his
payment difficulties and the different ways to solve his situation
It is in the interest of the bank to ensure that its customer is able to repay but it is also an obligation of advice for
its customers.
If the borrower becomes insolvent, the bank must send him a complete list of information:
Number of missed or partially paid
the total amount of payments to be made
the consequences of non-payment (cost, default interest rate, possible loss of the house....)
 Setting up the credit file
• In order to analyse the borrower's risk, the preparation of the file will focus on the following points:
- Determine the borrower's needs:
The question is --> Why?

- Improving knowledge of the borrower: in particular from the point of view of his assets and repayment capacity:
The question is --> For whom? must be answered.

- And finally, a financing plan must be organised with all of the above information:
The question is --> How?
The final decision

The final decision cannot be automated from the numerical results provided by the
two methods. Both methods record only the financial elements consisting of
expenses and revenues. All the elements seen above must be weighted.
• Family situation
• Amount of income
• Banking history
• Professional situation
• Personal contribution
• Savings
• ......