Find out what types of French mortgage are available, how much you can borrow, what the mortgage criteria are and how to apply for a mortgage to buy your French property
What types of French mortgages are available?
French banks tend to offer just one or two mortgage products with varying durations (typically between 6 and 25 years).
Fixed-rate mortgages are the most popular option and (as the name suggests) offer an interest rate that is fixed for the duration of the mortgage.
Capped interest rate mortgages are also available which put a maximum limit on the amount of interest you will pay. These are often more expensive that fixed-rate mortgages and offer less long-term security against rising interest rates. However, they frequently have no early redemption penalties for partial of total reimbursement so you are able to pay the mortgage off early if you wish with no penalties.
Most mortgages are capital repayment, interest-only mortgages are available from a small number of banks but they are not commonplace and are viewed by lenders as extremely risky.
What are the criteria to get a French mortgage?
French lenders have a legal obligation to lend responsibly and so carry out a number of stringent checks before they approve a mortgage application. Most French lenders will currently allow British and EU buyers borrow up to 85% of the property purchase price whereas non-EU buyers can only borrow up to 80% (it is not yet known if this will change once Britain leaves the EU). This means you will need to provide a deposit of 15-20% of the property price and the lender will need to see proof that you have this money available. Most lenders prefer you to have sufficient savings to cover this rather than relying on the sale of another property or another loan. You will also need to prove that you can afford the notaire’s fees – usually around 8% of the property purchase price.
French lenders will also check that you can afford the repayments by examining your debt-to-income ratio. They require that once your new mortgage is taken into account your contractual outgoings (for example rent or another mortgage) do not exceed 33% of your monthly income.
French lenders will want to see proof of continuing income, for example a pension or ongoing employment, and a mortgage cannot be granted on the basis of future income streams which are yet to commence. If you are self-employed you will need to show a consistent level of income over a period of three years whereas if you are employed on a permanent contract and have passed your probation you have to provide your last three payslips and a reference from your employer.
Getting pre-approval for your mortgage
You can get an agreement in principle from French lenders without having a particular purchase agreed. Getting pre-approval for a mortgage will speed up the buying process when you do find your perfect property and it will show vendors that you are a serious buyer and might help you negotiate on the price.
How do you apply for a French mortgage?
Once you have initial approval from the lender and you have found a property and had your offer accepted, the notaire will draw up the contract (compromis de vente). This contract should include a mortgage clause detailing how much you need to borrow and the duration of the mortgage. It will also stipulate a timeframe in which you have to apply for a mortgage and also a timeframe for obtaining the mortgage. This clause protects you and your deposit should your mortgage be refused.
You will need to submit your financial paperwork to your lender – this includes bank statements, proof of income, ID and proof of current address but every lender has its own specific list of paperwork that is required. Be prepared to answer any questions or provide any additional information required.
Most mortgage lenders require you to take out life insurance cover and so you will be asked to complete a medical questionnaire and possibly some tests and a doctor’s examination.
Once your application is complete the bank will submit it to the underwriter for approval – this can take anywhere between 1-3 weeks. Some lenders will require a property valuation while others won’t.
French mortgages must be debited from a bank account held in France so you will have to open a French bank account. Some banks request that you open an account with them as a condition of the mortgage.
How long does a mortgage application in France take?
The mortgage application process takes approximately 60 days and the overall purchase process takes approximately 90 days but this depends on how many applications the lender is dealing with at that particular time. The whole process can easily be finalised within a period of 6-8 weeks.
How much does it cost?
You will have to pay the cost of registering the mortgage guarantee (done by the notaire) which is around 1-1.6% of the mortgage amount.
There is also the lender’s arrangement fee which varies between a few hundred euros and 1% of the mortgage amount.
If you use a French mortgage broker you will have to pay their fee at the end of the process – this varies depending on the broker.
You will also have to pay for the life insurance you are required to take out and the cost of this depends on your age, state of health and the insurance provider. You can legally change your insurance cover to an equivalent French policy during the first year after you complete on the property purchase.
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