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Guide to French Mortgages
Guide to French Mortgages Eligibility & criteria
All of the mortgages sourced by French Mortgage Broker International Private Finance are in Euros and secured against French residential property. French mortgages are full status and therefore proof of income and outgoings are required to submit an application to a lender. The maximum loan to value available is 90% of the purchase price which can include estate agent’s fees but not notaire’s fees. French lenders assess eligibility on the applicant’s capacity to repay the mortgage. As a guideline, your existing monthly outgoings as well as the monthly repayment 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. Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings. To find out how much you can borrow, complete this quotation request form. French lenders will not consider lending to UK or US companies but 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 minimize 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.
Types of mortgage
Mortgages can be obtained for the purchase of new or existing properties, or properties on leaseback schemes.
A variety of products are available. Both interest-only and repayment mortgages can be arranged on a variable or fixed-rate basis, or a combination of both. Terms can be from 6 to 40 years, however loans must be repaid by the age of 80. Many of the products do not have any early redemption penalties. For an idea of the current rates available see this Best Buy Tables, or for a personalized quotation complete the quotation request form.
Documentation required by the lender
Under French law, lenders are required to have full documentation proving that the borrower can afford the mortgage repayments, and you will therefore be required to submit a number of supporting documents. Please see below for a summary of what will be required. A detailed list is compiled based on your situation and sent to you with your personalized quotation. You will need:
- Proof of identity & residence
- Proof of income & outgoings
- Bank statements
- Property details
An Agreement in Principle can be obtained from a lender once all of the necessary documentation has been submitted. This takes approximately five working days. However, for loan amounts in excess of €750,000 this may take longer. An agreement in principle from a French bank can make your negotiations on a property purchase more successful as the seller can be sure you have the finance in place to complete your purchase. We would recommend that you allow a minimum of eight weeks from application to the lender to completion. If the timescale is tighter than this it is possible to purchase in cash and arrange a post finance mortgage on similar terms.
Life insurance is mandatory with the majority of French lenders, and many require borrowers to use their chosen provider. In some instances, it may be possible to utilize an existing or new UK, US or French policy. If you do not want to take out French Life Cover please specify when applying for a quotation to ensure you are quoted suitable products.
Buildings insurance must be in place for completion. A mortgage broker can refer you to a specialist overseas insurance provider.
You will need to open a French bank account before completion, from which your mortgage repayments will be debited. Normally your mortgage consultant can assist you with this at no additional cost if required.
Payment of your French mortgage
Please be aware that missing a mortgage payment in France may have serious consequences and we therefore strongly advise you arrange for monthly debits from a UK account. A number of foreign exchange providers offer a renewable 12 month regular payment plan. The exchange rate is fixed at the start of the plan, and the agreed amount will be debited from your UK account and sent to your French account each month. This service gives you peace of mind in the knowledge that your French mortgage repayments will be met automatically each month.
Transferring funds to France
Whilst purchasing your French property 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. Paris Property Group can recommend carefully selected Foreign Exchange providers on request.
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
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.
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.
Real Estate Agent’s Fees
Real Estate Agent’s Fees are often included in the purchase price. Contact International Private Finance for more information and received a tailored free of charge quotation most relevant to your circumstances.