This article, written by our Managing Director Fiona Watts, first appeared in the October 2020 issue of French Property News

Is Cash Quicker than a French Mortgage?

It is certainly worth considering a French mortgage because of the multiple benefits it provides over buying in cash – many of which are even more pertinent given the current situation [coronavirus pandemic and national lockdowns]!

This pandemic has bought into sharp focus the impossibility of knowing what the future holds, and importance of having liquid assets that you can rely on should you experience an unexpected drop in income. Releasing equity on a French property once you have bought it outright in cash is almost impossible due to the French banks’ extremely rigid criteria. In other words, should you purchase without a mortgage the only way to get any money back out of the property in the future would be to sell it. Moreover, the exchange rate is currently not in sterling’s favour, whilst the French mortgage rates are (as low as 1% for a fixed rate!). This means you can save (or invest) most of your sterling cash savings (many investment vehicles offer annual returns of 5% or more), borrow up to 85% of the purchase price on a French mortgage and then only exchange the amount you need for a deposit. Many people make money by purchasing with a French mortgage this way!

In regards to the timescales, it is rarely the bank that holds up the purchase process. The notaire’s checks and processes typically take around 2 months, whilst the mortgage application and offer, which can be initiated at the same time or earlier, are usually completed in a month. In fact, last month we got a full mortgage approval issued within 8 days of submitting the application! So far, the banks haven’t materially changed their lending criteria and are still very keen to lend to non-residents. Although it’s by no means a guarantee of eligibility, the fact that you could purchase it outright in cash will be a positive. Do use an experienced French mortgage broker to gain time as their files should be prioritised by the bank. They should also liaise with all third parties on your behalf – chivvying the notaires, and immobiliers and anticipating any potential stumbling blocks as well as assisting in opening bank accounts, arranging the insurances etc. The only caveat is that a broker and bank can only work as fast as the client – so if you are considering a mortgage start gathering your paperwork in advance of any application to give you the best chance of success.