French Mortgage Property
A French Mortgage Property in France for your property on the French Riviera or elsewhere in the country? I will help you in this page in your mortgage process; to make it easier.
How to do for non-residents who need to finance their property in France? In fact, no need to come to France for your French Mortgage Property: Buying a home in France can be a remote process with some ‘mortgage providers’!
Choose a bank where there is English-speaking specialists will take care of your through every step of your French Mortgage Property and will give you all the necessary advice.
Make sure that you will be introduced to English-speaking relationship managers in your ‘adopted region’. It should not be hard to find as largest banking and financial services companies have all now usually an English-speaking team for your French Mortgage Property.
As you would expect from any mortgage company choose the one that offers practical assistance in the purchase of your property: benefit from them!
Mortgage company you will choose must have a bilingual team dedicated to ‘non residents’ who want to invest in a French property and who need a French Mortgage Property with serious experience in this domain and ready to assist you in getting started, during the process and key stages of your project.
They have to answer to all your questions and explain in English the details of your home purchase.
All the documents regarding your French Mortgage Property have to be in English or translated in English for your understanding: request for an ‘in principle mortgage quotation’, ‘account opening + mortgage’, application forms, life cover subscription and mortgage contract.
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Once you have identified a region and narrowed your search down to 2/3 potential properties it is important to commence the search for the right French Mortgage Property and to be clear on what is achievable.
Caution must be taken, as in France the moment you put in an offer on a property and that offer is accepted, you will be required to sign a pre-sale contract, ‘compromis de vente’, and place a deposit which can be as much as 10% of the asking price.
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A mistake at this point could result in costing lot of money. In some circumstances this deposit is non refundable should you fail to complete your purchase.
This is why seeking professional advice and guidance is imperative prior to the signing of any legally binding contract.
The preliminary contract commits both the purchaser and vendor to the transaction, subject to a number of ‘conditions suspensives’ (get-out clauses). Once the preliminary contract is signed and a deposit paid, the purchase price is fixed and may not be changed.
A completion date is included in the contract, which is typically 8 weeks hence. The deposit is paid in to a special ‘escrow account’ held by the Notaire (French conveyancer or legal representative) acting for the seller, or to the estate agent providing he is covered by a professional guarantee of a ‘caisse de caution mutuelle’.
There is a legal requirement that the agent should display a certificate in their office to this effect. The purchaser generally has one month to obtain its French Mortgage Property from the date of signature on the contract.
I strongly suggest that professional advice is sought from an overseas financier to ensure that lending is achievable to secure and complete the purchase.
It is never too early to start this process, as a number of supporting documents are required for French Mortgage Property applications and these can take time to collate.
The importance of this supporting paperwork is due to the inability of French lenders to access credit searches, such as those available to other mortgage lenders.
The only information accessible to overseas based lenders are public domain information, such as County Court Judgments, bankruptcy etc. To overcome this gap, these lenders don’t have any other option but to use other sources of information, such as bank statements and mortgage/outstanding loan statements including credit card account details.
These documents provide the details surrounding payment history and are therefore used to judge the risk by the lender.
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Accessing a French Mortgage Property can seem so much more of a tedious process than in other countries.
The French legal environment, as far as banks’ responsibility towards their clients is concerned means that lenders must be prudent and diligent when assessing people’s borrowing capacity.
For example, the concept of self-certification mortgages does not yet exist in France. French lenders use specific calculations to determine how much each applicant can borrow against a French purchase.
Rather than using an income multiplier as a basis, most French lenders calculate financial commitments (loans, rents…) including the requested mortgage, as a percentage of stable pre-tax income.
As a general rule, the ratio should not exceed one third (this is not French law but simply widespread practice among lenders in France), but obviously this depends on the figures involved, as the higher the income, the higher the debt ratio can be.
In fact, most lenders try to apply their own rules with common sense and look at the actual amount of disposable income, not just the percentage. As for loan-to-value, the usual maximum in France for non-resident buyers is 70% or 80% going up to 85% in certain circumstances.
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| Dollars, Sterling, Euro Or Other For Your French Mortgage Property? |
When buying your French Dream property foreign buyers will at some point have to weigh up the options for financing the purchase.
If they are lucky enough to be able to sell their existing property in their country to fund the French purchase, then they have little to worry about (a euro mortgage however can still prove financially beneficial).
But if not, they are probably going to need some advice about borrowing money. It’s a brave man that tries to go it alone, some might say foolish.
Foreign buyers have different currency options for financing their new property in France: Taking out a
loan in France in Euro, or taking out a loan on their existing property in their own country and currency.
As although it might be slightly lengthier to obtain and incurs a notary registration fee of up to 2% and higher loan application charges; a loan in euro presents several strong advantages, many of them financially rewarding.
- Interest rates are generally up to 2% lower than as example sterling rates and more stable. As they are influenced by the European Central bank.
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Using the French property as security preserves equity on the borrowers own country assets.
- Borrowers are entitled to off set the mortgage interest in their tax declaration when the property is rented or let out.
- Specialist Mortgage companies based in your country and having branches in France are better placed to assist their clients throughout the buying process.
- Once purchased, it is impossible to release equity from the French property for every day matters. Equity can only be released for very specific and somewhat limited reasons. Therefore it is recommended that your French Mortgage Property be considered at time of purchase.
- French consumer law provides greater protection for the borrower than UK law, for example, the cooling off period of Ten Days before accepting the mortgage offer.
All these reasons and more make borrowing in Euros more feasible an option than it has ever been, so ensure you obtain the right French Mortgage Property advice from a fully qualified Overseas Mortgage company before you release equity on your property in your country.
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| Usual Rules For Non-Residents Mortgages |
- Currency : EURO
- Loan to valuation ratio: up to 85% of the purchase price or our valuation, whichever is lower (excluding legal fees)
- Minimum Amount: 50,000 €
- Maximum term: up to 50 years, now! Applicants must be aged over 18 and all borrowing repaid by the age 75, subject to status.
- Interest rate: fixed rate/variable rate/capped rate
- Security: first legal charge (mortgage) – Customers’ property in France is at risk if the borrower do not keep up with repayments
Repayments
- Existing property: repayment of capital and interest will be required in monthly instalments. The first instalment will be dependent on the date of the first drawdown of the loan.
- Property under construction: the first instalment is usually payable within one month of the first drawdown of the loan. The instalments are based on the amount of funds released. A maximum of 24 months deferred payment of capital may be granted on that occasion.
- The first legal charge on the property is usually registered upon signature of the final deed with the ‘notaire’.
Note: My experience showed me that ALL can be negotiate with a mortgage company especially with some banks; with a smile it works even better. Don't be shy! After all a mortgage company is a shop where money is sold and YOU are the customer...
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| Documents Usually Required For French Mortgage Property Arrangement |
Property details (Preliminary contract)
Evidence of income:
- Identification proof (passport, birth and marriage certificates must be certified by a legal authority).
- Confirmation of address: copy of gas, electricity or phone bill showing present address (dated within last 3 months), also must be certified by an officer of the bank or a legal authority (no cell phone bill).
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| Main Criteria For French Mortgage Property Approval By A Bank |
Net yearly income of more than 50,000 € and financial investments or savings of more than 20,000 € after the property purchase has been done.
Affordability – up to 33% (fixed monthly commitments including the requested mortgage loan repayments compared to the net income per month) or a sufficient disposable income.
Regular and stable income
- salaried applicants: it is normally require they have worked for the same company for at least 12 months.
- self-employed: must have run their business for at least 3 years.
Mortgage insurance: Life cover in mandatory. This insurance must pays off all or part of your remaining mortgage in the event of death or permanent disability. Insurance cost is monthly calculated on the outstanding capital.
Choose an insurance regulated by the French Insurance code, your bank has usually its own service. Ask for full terms and conditions when you apply.
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| The 50 Year French Mortgage Property Arrives In France |
Two French mortgage brokers are offering 50 year home loans.
Cafpi and Meilleurtaux are marketing the long-term mortgages, though in each case the product is being provided by Spanish bank Kuxta Banque.
It is thought to be the first time that such long-term loans have been available in the French market. They have been available in the UK before, where they are not widely used – though 40 year loans are now very common.
Traditionally French Mortgage Property terms have been considerably shorter than their UK counterparts, with both borrowers and lenders in France being conservative when it comes to loans over long terms.
However, the steady rise in house prices in many parts of the country has forced many would-be buyers to look for a different range of mortgage products.
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From 2002 to 2006 the average length of a mortgage in France grew from 15 to 18 years. In 2005 the first 35 year terms home loans were introduced and now the 50 year barrier has been reached.
The main advantage of longer-term mortgages is that the monthly repayments are lower; the chief drawback is that over the duration of the loan the borrower will pay considerably more in interest.
Cafpi say that such products are not aimed at a wide market but will be useful in certain untypical cases. A spokesman said that they might for example appeal to young people who can achieve monthly repayments that are the same as renting a property.
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The fact that as populations age people will have to work longer may also make such products more practical. But other providers warn about the risks, which include a lack of mortgage insurance – which is not mandatory on such products – and also the fact that if the housing market takes a down turn the borrower may be left with a property worth less than the loan.
This is more likely in longer-term mortgages where relatively little of the capital sum is repaid in the early years.
For example on a 100,000 € loan over 50 years, little more than 5,000 € of the advanced sum may be paid back in the first decade.
This of course only really matters if the borrower is obliged to sell. Great deals of clients want to take out a mortgage over the shortest period possible, as long as their income will allow as per the French affordability rules.
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My customers generally want to pay off their French Mortgage Property as quickly as possible, so based on the current climate; it's difficult to say just how popular 50 year mortgage terms would be.
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