Getting a Mortgage in France
– The Facts
As overseas mortgage markets go, France is probably one of the easiest and most straight-forward in which to get a mortgage as a foreigner. The market is well-regulated and every year thousands of foreign buyers purchase in France without any problems or complications. There are however some things you need to be aware of from the start:
How much can I borrow?
Our experience has been that, unlike in the UK where banks are currently reluctant to lend, interest only is a dirty word and arrangement fees keep rising, in France the opposite seems to be true. Loans of up to 85% LTV are available on both repayment and interest only options (70% for remortgages), fees seem fairly stable and loans above €1m are simply encouraged!
What are the rates?
Like in the UK, these vary considerably depending on what terms you are eligible for and want. Interest rates in the Eurozone are a little higher than in the UK at the moment (June 2012) but anything from 2.5-5.25% is the norm with fixed and variable rates available. Rest assured though that at Choice Loans we will seek to get the rate most suitable for you.
Are there any income requirements?
French banks have strict affordability criteria which means that, including the mortgage you are applying for, the sum total of all interest payments you have to make on your debts (inculding your UK mortgage and any other personal loans you have) cannot exceed 35% of your net income.
What else do I need to know about French mortgages?
Similar to the UK the duration is up to 30 years and the minimum mortgage size is €50,000. Both repayment and Interest only options are available and French Lenders generally require you take Life insurance with your mortgage but this is relatively inexpensive and will clear your mortgage if you die during the term.
How do negotiations work?
This is similar to the UK. You can enlist the help of an Agent, view properties, discuss with the Agent or the Seller what their properties are, how long the property has been on the market etc. and, if you wish, make an offer just like you would in the UK.
What is the legal process like?
The whole process takes much less time that in the UK and, in theory, if your holiday is long enough you can make and offer and know that the deal is legally binding before you come home! All this happens much earlier in the process than in the UK. Notaire fees and taxes come to 8-10% of the price of a previously owned property, 4-5% for a new one. Watch out too for the French wealth tax of 0.55% charged on net assets (so, net of your mortgage) over €800,000 or 1.8% on assets over €16.79m
How do I get a survey done?
In fact, surveys are not the norm in France and this is one of the biggest differences with the UK. However, if you have a concern about any structural element of the building or just want peace of mind, you can instruct any one of the growing number of English speaking surveyors working in France to have a look. And/or arrange a visit from a local builder to get an estimate of costs. Obviously you should do this before signing any purchase agreement but if time is tight you can ask the Notaire to include a “Clause Suspensive” in the “Compromis de Vente” to ensure a purchase is subject to a satisfactory survey.
It may sound tricky but as many before you will testify, getting a French mortgage isn’t actually that hard and when the rewards are as great as owning a place in the Burgundy countryside or a pied-a-terre in Paris, we hope you’ll agree it’s well worth it.
Lastly, for your foreign exchange requirements we recommend the guys at Sterling Exchange. Please call Daniel or Kyri on 020 7329 9977 and mention Choice Loans in order to avail of rates that will be far better than your bank will offer you.