Simple definitions, practical examples and common mistakes to avoid when reading financial simulations.
12 concepts · A to Z
Annual percentage rate. It combines the loan rate and certain mandatory costs to compare offers more clearly.
Two loans with the same headline rate can have different APRs if fees or insurance differ.
Common mistake : Comparing only the advertised rate without checking insurance, fees and conditions.
Loan paymentsAmount a household could theoretically borrow based on income, charges, down payment, rate, term and insurance.
A €1,000 target payment over 20 years does not finance the same amount at 3% and 4%.
Common mistake : Confusing the amount borrowed with the total purchase budget, which also depends on down payment and fees.
Mortgage borrowing capacityDifference between money received and money paid out for an investment over a given period.
If net rent is €650 and the monthly payment plus charges is €720, monthly cash flow is -€70.
Common mistake : Assuming positive yield means positive monthly cash flow.
Rental yieldMechanism where gains generated by capital also generate new gains over time.
€1,000 invested at 5% for 10 years becomes about €1,629 if gains stay invested.
Common mistake : Underestimating the effect of time and overestimating short-term results.
Compound interestShare of monthly income used to repay loans and similar fixed commitments. It helps assess whether a loan remains sustainable.
With €2,800 of income and €840 of monthly loan payments, the debt-to-income ratio is 30%.
Common mistake : Looking only at the percentage without checking the remaining disposable income.
Mortgage borrowing capacityAmount left after fixed charges and loan payments. It complements debt-to-income analysis.
Two households at 33% debt-to-income are not in the same position if one has €1,200 left and the other €3,000.
Common mistake : Relying only on a lending threshold without checking actual budget comfort.
Mortgage borrowing capacityMoney already available that a buyer contributes to a property or financial project.
A down payment can cover notary fees, reduce the loan amount or strengthen the mortgage application.
Common mistake : Using the entire down payment without keeping a safety margin for unexpected costs.
Mortgage borrowing capacityRatio between annual rent excluding charges and the purchase price. It is a fast first indicator.
A €700 monthly rent on a €180,000 property gives a 4.67% gross yield.
Common mistake : Stopping at gross yield even though it ignores charges, property tax, vacancy and taxation.
Rental yieldAmount paid each month to repay a loan. It usually includes both principal and interest.
At the start of an amortizing loan, the interest share is higher than near the end.
Common mistake : Choosing the lowest payment without checking the total cost of the loan.
Loan paymentsSalary amount after employee social contributions, before or after income tax depending on the context.
Net before tax is often used for comparison, while net after tax is closer to the amount received.
Common mistake : Comparing gross salary, net before tax and net after tax as if they were the same amount.
French gross-to-net salaryRental yield after recurring charges, before or after tax depending on the method used.
Two properties with the same gross yield can have very different net yields if charges differ.
Common mistake : Comparing net yields without checking which charges are included.
Rental yieldCosts paid during a French property purchase, mostly made up of taxes, with notarial fees, disbursements and formalities.
For existing properties, these costs are usually higher as a share of the price than for new-build properties.
Common mistake : Forgetting them in the purchase budget even though they are often covered by the down payment.
French notary feesOnce you understand the term, use the calculators to test your own amounts, terms, rates and assumptions.