Quick Guides to French Mortgages : Guide to French Mortgages: what you need to know when buying your French home
How to obtain a non-resident French mortgage for your French property in France
International Private Finance is the leading* and award-winning French mortgage broker for International buyers who are looking to buy or who already own a property in France.
We have prepared this French Mortgage guide to provide you with an idea of the process involved. This is what to expect if you are thinking about purchasing a dream home in France with a French mortgage.
*IPF arranges more French mortgages for international buyers than any other french mortgage broker, based on figures provided by a number of French mortgage providers lending to non-residents.
French Mortgage Eligibility & criteria
All French Mortgages are in Euros and secured against French residential property. French mortgages are full status, this means proof of income and outgoings will be required to submit an application.
The maximum loan to value available, for non-French residents, is currently 85% of the purchase price. This can include estate agent’s (immobilier) fees but not Notaire’s fees.
French Mortgage lenders assess eligibility on the applicant’s capacity to repay the French Mortgage. As a guideline, your existing monthly outgoings, as well as the monthly payment on your new French mortgage, should not exceed 33% of your gross monthly income. A percentage of any rental and investment income you receive can be considered. Existing mortgage, rent, personal loans and maintenance commitments are all considered as outgoings. To find out how much you can borrow, refer to our French mortgage calculator and then complete our quotation request form.
French Mortgage lenders will not consider lending to UK companies. It is possible to create a French company expressly for the purchase of a property. This is called a Société Civile Immobilière or SCI. This type of purchase may be advantageous for groups buying together and can minimise French inheritance issues. Before making a decision in regards to purchasing in the name of an SCI we recommend you seek legal and tax advice.
Different types of French Mortgage are available for different French property types
French Mortgages can be obtained for the purchase of new-build (VEFA) or existing properties, main homes, second or holiday homes or investment properties including Leaseback schemes.
Renovation and construction loans are available, however construction estimates will be required at the time of application. They can only be accepted if they are from French registered builders. Once the French mortgage has been approved, funds will be released by the French Mortgage lender. These will go directly to your builders following the submission of their invoices. In the case of construction loans, more detailed information on the project will be required. In this case please speak to one of our French Consultants.
Regardless of the mortgage amount you are looking for, it is very difficult to remortgage or do an Equity release on your French property. These types of loans are only available to non-residents in a very limited set of circumstances and both will incur costs both at the Notaire’s office and with the new lender. It is also possible to raise funds on your French property to redeem another mortgage you may have. We recommend that you check with your existing lender if any penalties will be payable for canceling your existing French Mortgage.
French Mortgage products
A variety of French Mortgage products are available for your property purchase. Interest-only and repayment mortgages can be arranged. These can be on a variable rate, capped or fixed-rate basis, or a combination of both. Terms can be from 5 to 25 years and fixed-rate mortgages permit you to fix the rate for the lifetime of the loan! Euro mortgages must be repaid by the age of 75 to 80. French mortgage rates are all based on the Euribor, the interbank lending rate set by the European Central Bank. The Euribor is currenlty negative, hence why French mortgage rates are at near-historic lows.
Documentation required by the French Mortgage Provider
Under French law, French Mortgage lenders are required to have a mortgage application that provides a full set of documents proving that the borrower can afford the French Mortgage. You will therefore be required to submit a number of supporting documents. See below for a summary of what will be required. A detailed list will be compiled based on your situation and sent to you with your personalised quotation.
You will need:
Proof of identity & residence
Proof of income & outgoings
French Mortgage Timeframe
An Agreement In Principle (AIP) can be obtained from a lender once the mortgage application has been submitted. This takes approximately five working days. For loan amounts in excess of €750,000 this may take longer. Assuming you have signed the compromis de vente (sales contract) and we have obtained the approval it will take another 2 weeks for a valuation to be instructed and conducted (this is paid for by the mortgage provider) and a further week to get the mortgage offer issued.
Once you have received the hard copy of the mortgage offer, you must wait for 11 days before signing the offer and sending it back to the bank. If this legal 11-day cooling-off period is not respected and the bank receives the offer before this limit has expired, they will reject the mortgage offer, resend it out to you again and the 11-days starts again.
Once the bank has accepted your signed offer, it will take about a week for them to release the funds to your Notaire and completion can take place.
We recommend that you allow a minimum of eight weeks from application to the lender to completion.
Life insurance for a French Mortgage
Life insurance for all, or the majority of the mortgage amount, is mandatory with the majority of French lenders, many require borrowers to use their chosen provider. In some instances, it may be possible to utilise an existing or new UK or French policy. Please contact a consultant for more details. If you do not want to take out French life insurance, please specify when applying for a quotation. This ensures we only quote you suitable products.
You will need to open a French bank account before completion. French mortgage repayments will be debited from this account. Your Consultant can assist you with this at no additional cost if required.
Payment of your French Mortgage
Please be aware that missing any French Mortgage monthly payments may have serious consequences. We strongly advise you arrange for monthly direct debits from a UK account.
A number of foreign currency exchange providers offer a renewable 12-month regular payment plans. The exchange rate is fixed at the start of the plan. The agreed amount will then be debited from your UK account and sent to your French account each month. This service gives you peace of mind that your French mortgage payments will be met automatically each month. Please ask one of our Consultants to recommend a provider if this is of interest.
Transferring funds to France
Whilst purchasing your French home it is also likely that you will need to transfer funds to France, to pay a reservation fee, a deposit on the property, or to cover additional purchase costs.
Making payments in a foreign currency will mean you are exposed to movements in exchange rates. This is likely to affect the final cost of the property you are buying, as will the exchange rate you receive when you make the transfer.
Through our carefully selected foreign currency exchange provider, we are able to not only save money on the exchange rate you receive but reduce your exposure to exchange rate movement.
For further information on how these services can benefit you please talk to your consultant who will be able to answer any questions you may have.
French Mortgage Completion
Mortgage funds will be released by the lender to your Notaire for completion of the purchase. You do not have to be present at completion and can give Power of Attorney if necessary, your Notaire will be able to discuss this with you in more detail.
Costs of setting up a French Mortgage
Bank’s arrangement fee – typically 1% of the loan amount up to a maximum of €2,000. Should the lender wish to carry out a valuation, this will be covered by the arrangement fee. This fee will be deducted by the lender from your French bank account following completion. We often can obtain discounts for our clients due to the volume of business we conduct with different mortgage providers.
Notaire’s Fees – your Notaire should provide you with a breakdown of fees payable once a sales agreement has been signed. If you take out a French mortgage to purchase the property or at a later stage, a further cost will be passed on to you by your Notaire for registering the mortgage at the land registry. ON average you should set aside 7.5% of the purchase price for an existing property and 3% for a new-build
Estate Agent’s Fees – often included in the purchase price.
We charge a non-refundable commitment fee of between £250 and £500 (subject to the loan facility size) which is payable when you wish to start the application process.
A further fee may be payable on completion of the mortgage. Please refer to your personalised quotation for confirmation.
We recommend that you obtain specialist legal & tax advice before purchasing in France.