Ask Miranda: How do I go about arranging a mortgage in France?

Question: I am thinking of buying a property in Paris and am considering taking out a mortgage to do so. How do I go about this?

French mortgage rates have never been so low, but they may not remain so for very much longer. If you are considering a mortgage, it makes sense to contact banks or a mortgage broker early on. This enables you to identify your borrowing capacity upfront and act quickly to secure your ideal property.

Mortgage rates can be fixed or variable rates or a combination. Banks are currently offering very competitive rates, below 3% in some cases. The better the profile of the borrower, the more advantageous the rate may be. Consulting a mortgage broker may enable you to obtain a discount and help you through the minefield of the contractual small print.

French banks normally lend up to 85% of the assessed value of the property and planned renovations to most non-resident buyers. Estate agents’ fees (but not notaires’ fees) can be included.

The Banque de France sets the loan-to-income ratio for issuing mortgages. Your monthly outgoings plus the monthly mortgage repayment should not normally exceed 33% of your gross monthly income. However, for borrowers with a strong profile the French banks may allow the debt to income ratio to go above 33%.

Borrowers must obtain life insurance to guarantee the loan. You are not obliged to take the insurance offered by the bank providing the mortgage, and it may pay to look to the competition for lower premiums. Recent legislation, the loi Hamon, allows a borrower a year from the start of the loan to exchange their insurance policy for one whose premiums are less expensive.

You should also ensure that you can transfer your loan to another property, if you sell yours before you have paid off the loan. Early mortgage redemption penalties can be as high as 3% of the loan amount.

If you are seeking a mortgage in France, you can ask for the preliminary sales contract to include a conditional clause for financing. This sets out the intended loan amount, rate of interest, and length of the term. If you can’t obtain a loan on terms as favorable as those, you are released from the obligation to buy the property without penalty.

Sellers of luxury property in Paris sometimes prefer a buyer who does not need a loan contingency clause. So, agreeing to waive this conditional clause can be a negotiation point.

For the latest French mortgage rates, you can view International Private Finance’s best buy tables. To see how much your monthly French mortgage payments would be for a given loan, see our French mortgage calculator.