In recent years French mortgage lenders have become far more willing to offer loans to non-resident buyers, so you do not need to rely on re mortgaging your existing home or on an international lender in your home country. The use of the internet and the availability of bi-lingual services now makes this a far easier process.
French mortgage interest rates often compare favourably to those in the UK, so it is frequently cheaper to purchase your French home with a mortgage, rather than re mortgage your existing home.
However, if you are buying a home in France, and you are continuing to derive your income from outside of the Eurozone, you need to weigh up the currency risk associated with obtaining a Euro mortgage.
All major French banks offers loans to both residents and non-residents, but there are also more specialist property lenders that should be considered, particularly if you have peculiar or difficult circumstances.
The use of a broker is a most useful way of securing a mortgage on the best terms, and there are now a number of bi-lingual internet brokers that offer a service to international buyers.
The French post office has its own bank (La Banque Postale), which is able to offer home loans. They are keen to establish a strong presence in the market with attractive rates and low charges, although their procedures are rather bureaucratic and their conditions often stringent.
There are various types of guarantee against a French home loan, with different level of fees payable in each case. If you are eligible, an ‘institutional guarantee’ is to be preferred to a conventional mortgage charge.
You will not be made a formal mortgage offer from a French lender without first signing a sale and purchase contract for the property, but you should try and obtain a pre-approval mortgage certificate, which may prove useful in price negotiations.
If you are non-resident, you will need to be patient, and be prepared to supply plenty of supporting documentation, as the process may well take some time to complete.
It would do you no harm at all to open a bank account in France at the earliest opportunity, into which you should deposit funds on a regular basis, as this will go down well later with the bank in a future mortgage application, and is likely to speed up the mortgage application process.
Whilst there are number of general rules that apply on the terms for a mortgage, you will find that individual circumstances do make a difference, sometimes to your detriment, other times to your favour. Banks will assess your credit risk and take a view, whatever the general rules. Thus:
As a general rule, you will not be able to obtain a mortgage greater than 80% loan to value, but the figure may also be lower, or higher, depending on your circumstances.
As a general rule, the mortgage repayments cannot exceed 33% of net income, a figure that may be lower or higher, depending on your circumstances.
French lenders offer both fixed and variable rate mortgages, and whilst the latter are generally a ‘best buy’, they are also more likely to include tougher early redemption penalties.
Some lenders offer seemingly attractive ‘teaser’ discounted mortgages, but you need to read the small print to ensure that you are not ultimately signing up for a more expensive mortgage or other tougher terms.
All lenders are required by law to provide you with the annual percentage rate (APR) of the mortgage, in order that you can make a proper comparison between different offers.
The fees associated with getting a mortgage are not insignificant, so do ask about them and try and negotiate a reduction in fees with a prospective lender/broker.
Mortgage insurance protection is mandatory for French lenders, which does raise the total cost of the mortgage.
Home-owners in France are able to use the equity in their property to release capital for home improvements or other expenditure, whether or not they have an existing mortgage.
Conversely, equity release schemes (sometimes called ‘home income’ or ‘life-time’ mortgages) are as yet few and far between, and have tough age limits and loan to value rules.
If you are resident in France, there are a range of subsidised (or regulated) mortgages available, which may well be of particular interest to those on modest incomes or first time buyers, e.g. children of expats.
There is a high level of regulation of the mortgage industry in France, and if you consider that you have not been treated fairly or honestly, there are steps you can take to obtain recourse.
If you get into difficulties with your mortgage repayments, the lender is required by law to help you through the difficult period and, ultimately, there is recourse to an external body who are entitled to intervene in the process.