1. Although the mortgage market in France may be historically less developed than those in the UK, the USA or Australia, the French banks’ more conservative approach over the last two decades has meant they are now better placed in the post-credit crunch environment. As a result, their appetite for lending is now stronger than that of their counter parts in the countries mentioned above.
2. Nevertheless, the fallout from the recent economic troubles has also seen the French market recover comparatively quickly with regards to the flexibility and variety of products on offer. Desirable features such as 100% mortgages, interest only loans and equity release are all currently available in France.
3. French lenders calculate affordability using debt-to-income ratios, rather than Anglo Saxon - style income multiples. Put simply, French lenders will generally allow between 30 – 40% of your gross income to be taken up with repaying existing debt commitments (mortgage, personal loan, child maintenance, etc) and your new French mortgage.
4. Life insurance is generally obligatory when taking out a French mortgage. Some lenders insist on you taking out their policy, while others allow external policies to be assigned. There are, however, some lenders who don’t require the borrower to have life insurance at all.
5. Full term fixed-rate mortgages are very popular in the French domestic market, and there is a good range of these products available to non-residents. The lenders also cater for those who prefer variable rates, with mortgages that are revised every 3 months, or 1, 2, 5 or 10 years.
6. Interest only mortgages are available, although they are less common than repayment options. Generally there will be an interest only period for between 2 and 10 years (depending on the mortgage term) before the mortgage reverts to a normal ‘capital and interest’ repayment mortgage. Some lenders do offer interest only mortgages for the term of the mortgage, but choice of product here is far more restricted.
7. Re-mortgaging in France is a lot less common than in the US, UK, Australian and Irish markets. One of the major reasons for this is that when you purchase a property in France with a mortgage, you need to register the deed of the mortgage in addition to the deed of the sale. Each time the mortgage on the property is transferred, the mortgage will have to be re-registered with a Notaire, incurring additional Notaire fees. It is therefore very important that you ensure you have access to the best mortgage product, right from the start.
8. In obtaining a French mortgage there are two main options that you have: a) or b).
a. Approach a French bank directly. If you are thinking about approaching a lender directly it is important to remember that each lender has different criteria. If one lender turns you down or declares you ineligible to borrow from them, it may well be worthwhile approaching another lender to see what their view is.
b. Use the services of a good French mortgage broker. A good French mortgage broker will have access to the entire market and, in many cases, will offer discounted rates and margins that may not be available when approaching lenders directly. The broker will also be able to work with you through every stage of the process and, if they speak French, will be able to liaise with all of the
9. The maximum loan-to-value available is around 90% of the purchase price of the property. However in some instances - for loans above € 300,000 - it may be possible to borrow up to 100% of the purchase price. It is important to find out whether the LTV you have been quoted includes the estate agent’s fees. Some lenders are able to include these fees in the loan amount, while others only offer a percentage of the net purchase price.
10. There are various other quirky features you will come across when arranging your French mortgages. A perfect example of this is that when your mortgage offer is issued, under French law, there is a statutory 11 day cooling off period during which time you can’t return your mortgage offer. If you return it too early, the offer has to be re-issued and the 11 day cooling off period will start again!
Hopefully this will help give you an insight into some of the points you need to consider when looking into taking out a French mortgage to complete your French property purchase.
Over the coming months we will be looking at some other aspects in greater detail, so that we can help point you in the right direction.
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