French Mortgages : French Mortgage Glossary

At IPF we understand that the world of international finance can be complicated; but complex terminology in a variety of languages can only serve to make it even more difficult.

In an attempt to counteract this we have developed a glossary to explain some of the most common terms used.

Mortgage Terms & Types of Loans

Agreement in Principle – Initial approval from the bank which is subject to certain conditions being met i.e. further documentation being submitted or satisfactory valuation of the property

Base rate – A rate set by the National Bank or Monetary Governing Body which banks use as their benchmark when offering interest rates to borrowers

Best buy table – provides an indication of the most competitive products available at the time of publication in each product area, to non-resident borrowers.

Cancellation/Full redemption fee – Charge made by the lender for the repayment of the balance of the mortgage before the end of the mortgage term

Capital raising – Raising funds against an unencumbered property

Capped rate – A mortgage where the rate is capped, guaranteeing the maximum rate of interest that can be charged during the mortgage term

Charge – The security used by the lender to support a mortgage

Completion – Completion is the point at which the money to purchase the property is paid to the seller thereby changing legal ownership to the buyer

Discounted rate – This is a standard variable rate mortgage that offers an introductory discounted interest rate for a fixed period of time

Early redemption penalty – Charge made by the lender for the repayment of a lump sum, reducing the mortgage balance in advance of the specified mortgage term

EURIBOR – (European Inter-Bank Offered Rate) The European base rate set by the European Central Bank

Fixed rate mortgage – Mortgage repayments are fixed for a specified term

Gross salary – Income before tax is paid for an employed person

Interdit Bancaire – Status that signifies the blacklisting of an individual by the French banking authorities

Interest-only mortgage – A mortgage where repayments consist of only interest, during which the balance of the loan remains unchanged

Interest rate – Money charged by the bank for lending money

LIBOR – (London Inter-Bank Offered Rate) The base rate set by the Bank of England

Loan to value – (LTV) A percentage figure indicating the mortgage amount in relation to the property value

Margin – The difference between the interest rate and the base rate. The margin remains stable over the life of the loan. It is the base rate which fluctuates

Mortgage term – The period of time over which a mortgage will be repaid

Net salary – Income after tax has been deducted

Remortgage – Changing the mortgage on a property from one lender to another

Repayment mortgage – a mortgage where repayments are made up of both interest and capital

Unencumbered property – Property free from debt

Variable Rate – The rate fluctuates as and when the base rate changes

Essential Documentation & Important People

Acte de Vente – French deed of sale

Clause Suspensive – A condition in a French sales contract which must be met before completion of the purchase

Compromis de Vente – French preliminary sales agreement

Power of attorney – A legal document that authorises one person to act on behalf of another with either complete authority or in a limited capacity

RIB (Releve d’Identité Bancaire) – Written confirmation of bank account details provided by a French bank

SCI (Société civile immobilière) – A transparent non-trading French company used expressly for the purchase of a property.  A minimum of 2 shareholders is required. Any loan is made to the company and the individual share-holders stand as guarantors

Title deed – Documents proving legal ownership of property

Types of Property

Gite – French equivalent to a Bed & Breakfast

Leaseback – The property must be leased back to the developer for an agreed period.  The developer will let the property as holiday accommodation, providing guaranteed income for the buyer.  The buyer in effect becomes the landlord and therefore can qualify for a VAT refund.  The buyer is given the right to occupy the property for an agreed period each year

Off-Plan – A new property, often where payments are made to the developer whilst the building work takes place, with the balance payable on completion

Resale – An existing property

 

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