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Current lending parameters in France
If you are considering purchasing a property in France, it is important to be aware of the lending criteria banks use when considering a loan application. Certain requirements and conditions must be met in order to secure a loan for your property purchase.
Non-resident best-buy table
For purchases up to €2 million, lenders will typically allow a loan-to-value (LTV) ratio of up to 75%. This means that you can borrow up to 75% of the value of the property you wish to purchase. In France the maximum term for the loan is 25 years.
For purposes of obtaining a loan, it is preferable to purchase the property through a Société Civile Immobilière (SCI) or a Société à Responsabilité Limitée (SARL) as opposed to purchasing as an individual entity. The interest rates for these loans are fixed, ranging from 4% to 5%. Early repayment is not allowed, and the maximum age at the end of the loan term is 75. Term life insurance is optional, but it may be required if you have a W-2 income and do not have good visibility over future post-retirement income. Your debt-to-income ratio must be under 35%, and if you wish to consider taking a mortgage post-purchase, the loan process must be completed within 12 months of the purchase.
There are a few exclusions, or types of borrowers that may find it difficult to secure financing. These include those who are planning on renovating the property, investors who own multiple rental units, borrowers over the age of 65, those with an unstable income type, and those with a low deposit amount.
For purchases in excess of €2 million, the lending parameters are slightly different. The property can be owned directly or through an SCI or SARL, and the loan can be interest-only, amortizing, or a mix of both. The LTV ratio is up to 60%, and the maximum term for the loan is 20 years. The interest rates for these loans are fixed, ranging from 3.5% to 4%. There is no insurance requirement, and the maximum age at the end of the loan term is 85. Your debt-to-income ratio must be under 35%.
Similar to the previous lending parameters, there are a few exclusions. Investors who own multiple rental units, borrowers over the age of 75, those with an unstable income type, and properties classified as chateaux are excluded from these lending parameters.
It is important to note that these lending parameters are subject to change and may vary depending on the lender. Additionally, there may be additional fees and requirements that you will need to meet in order to secure a loan for your property purchase.
If you are planning on purchasing a property in France, it is recommended that you work with a trusted financial advisor and/or mortgage broker to ensure that you are aware of all the lending parameters and requirements. They can also help you navigate the application process and secure the best loan for your needs.