We have assembled a team of experts in the UK and France to assist with financing your French property and to guide you through the process of obtaining a French mortgage, and all at no extra charge to you. Why? Because we want to make it easy for you to join us, in the dream of owning a French property.
To apply for a French mortgage decision in principle, from a recognized and trusted UK high street Bank for a French Mortgage click here.....
It would be easy to assume that French Mortgages and the process to obtain a French Mortgage is the same as the process to obtain a mortgage in the UK or Ireland but in fact French Mortgage lenders work to a different set of criteria than elsewhere. There are also considerations involved in taking out a Euro mortgage, which, if the exchange rates are unfavourable, can work out more expensive than originally planned. With the right advice, however, even the most inexperienced borrower can successfully buy their dream home in France.
If you are buying a second home in France, there are three ways to raise the mortgage: against an existing UK property, providing there is sufficient equity; against the French property; or a mixture of both.
For most UK residents, raising capital against their UK property is a cheap and straightforward option. The funds are raised either by taking further borrowing on the current mortgage or by re-mortgaging to another lender and increasing borrowings that way. The fees involved are comparatively small and the process is comfortingly familiar, this option can also be excellent for a retirement purchase where your French property can be secured and moved into before selling up in the UK – we have found this to be far less stressful than trying to co-ordinate a UK sale and a French purchase at the same time – and the fees can be so minimal that you will consider it well worth it!
However, this option does rely on there being sufficient equity in your UK property, and some people are uncomfortable with the idea of using their family residence as security on a holiday home.
Raising a mortgage secured against the French property allows buyers to purchase a property without putting their main UK home at risk. There is a risk that currency fluctuations could increase the amount being paid over a period of time, but it is an attractive option, with historically low interest rates. There can also be tax advantages if you let out the property.
Finally, raising money against both the UK and French properties is popular with purchasers who do not have a large deposit or who want to keep their savings, perhaps to renovate the property. Basically, the deposit and costs are raised from the UK property, using part of the equity, while the difference is raised against the French property as a straightforward mortgage.
French property and how to pay for it, an overview:
Historically, the French property market has shown a steady return and has not experienced the 'boom and bust' cycles that we have seen in the UK. Prices have traditionally been stable and a home has always been viewed as just that - a home. The French often waited to buy until they had a work position in which they felt stable and settled or an inheritance made them consider a property purchase, still often with small French mortgages taken over a short term. The huge advantage of buying a property in France with a French mortgage is that once the monthly payments have been fixed they will normally never alter, so even if you opt for a variable rate (which will be capped to a maximum rate anyway) – if the interest rates change to a higher percentage, the difference you would have paid is added to the capital borrowed, to be repaid by extending the term of the mortgage until the amount is fully reimbursed. This in itself is probably one of the primary reasons why the French market has never had that "boom and bust" cycle. The UK has suffered from this, in line with recessions and interest rate changes, which have always prompted panic selling and their consequent price drops.
And although French culture revolves around the dinner table, it is safe to say that it never includes conversation about how much people's property has made in the past six months - or at least until recently! However, there are many factors slowly changing this, employment mobility, accelerating prices, a reduced availability of rental accommodation, an ageing population, a diminishing pool of reduced price renovation projects (snapped up by British bargain hunters!), a scarcity of building land, the French population migration away from the larger cities as they discover the delights of the daily commute, and finally, reduced French mortgage interest rates. However, the French mortgages system tends to be more conservative when calculating affordability and banks do not usually lend up to the same percentage value on a mortgage, or stretch the income multiples to the same extent as in the UK. Indeed, French law requires that the lender prove that the borrower can afford the repayments on the proposed mortgage, so self-certification of earnings is an alien concept.
The way in which banks assess mortgages varies slightly between lenders, with some having a higher minimum loan size or lower maximum loan to values. Overall, though, French lenders can be more cautious than British lenders. Banks generally consider loans from 15,000 euros, from between 65 to 85 per cent of the value of the property. The final percentage depends on a number of factors and varies from bank to bank.
French mortgages are not based on the UK model of income multiples: typically the calculation works on the principle that the total of the French mortgage payment, plus any UK mortgage or rent, plus any other long-term borrowings, should not exceed a third of the buyer's gross monthly income. As an example, if a buyer's UK mortgage was £300 per month and the proposed French borrowing was £200 per month, this totals £500 per month, so the buyer's gross pay would need to be at least £1,500 per month for the bank to consider the loan.
Mortgages are generally offered on a capital and interest method - in other words, repayment - and are granted over a 15- to 25-year period, depending on the bank and the amount borrowed. Traditionally, repayment has been the main method of lending, although some lenders are now offering interest-only options for the early part of a loan, reverting to capital and interest later on. This latter type of French mortgages we have found to be very advantageous for someone buying to renovate, as they can reduce their initial monthly outgoings while undertaking the renovation of their French property. If the property is then sold after renovation, there is normally no penalty from the French Banks we deal with.
Both fixed rates and variable rates are common in France. Variable rates are usually based on the Euribor (European Inter Bank Offer Rate) plus a loading. The fixed rates available are generally more expensive than the variable option, but they remain popular as they offer greater certainty that the loan repayments will remain within budget. Fixed rates for the term of the mortgage are common in France.
Stamp duty and taxes
Whilst the following may sound complicated and expensive it really isn’t too bad if viewed in actual terms – so we would suggest completing a mortgage application and then compare rates.
Buyers can expect to pay between 8 and 9 per cent of the purchase price on fees and taxes. It is normal for the applicant to be charged a fee by the lender, which is typically 1 per cent of the amount borrowed, although this figure varies, is usually capped for larger loans and can be negotiated if you know how, which is where we come in.
Most banks also insist on a professional survey, the cost of which will vary depending on the value of the property (as in the UK). There will be an added fee from the notaire (notary) for registering the bank's charge, (a hypotheque) which sometimes does not appear on a basic quote. Notaire's fees work on a sliding scale, where purchasers can expect to pay 0.825 per cent on a purchase price over 16,800 euros. It is worth noting that VAT is also charged on these fees. Miscellaneous expenses in the form of charges for paperwork and so on do not usually exceed £500. Additional fees for bank charges can add up to approximately 2 per cent of the purchase cost.
The taxes de publicité foncière, or land registry taxes, break down as follows into a departmental tax of 3.6 per cent, a communal tax of 1.2 per cent and a further tax on the departmental tax which equates to 0.09 per cent of the purchase price.
There is a stamp duty to be paid but it varies according to the property being purchased. A UK buyer can usually expect to pay the equivalent of £200 on stamp duty.
Most lenders will insist that buyers take out some form of life/disability insurance. Buildings insurance also needs to be taken out to protect the lender's interest, as in the UK and again we have negotiated rates with a number of insurance companies some of whom even have all the documentation in English for your reassurance.
Re-mortgaging in France
It is common to re-mortgage in the UK to raise money for a variety of purposes. This is not so common with French lenders, although some are starting to offer mortgages on this basis, allowing the borrower to take advantage of rising values and equity. However, generally speaking, if you think you will need additional funds later, it is better to raise these at the time of purchase, when it may be easier to obtain the finance. For example, if a buyer was to raise money for home improvements, most banks would insist on paying the builder directly on invoice, rather than allowing the borrower to handle the money. Even if it proves to be possible, the extra funds can be more expensive than those raised for purchase, but not always.
Customer protection when buying French Property with a French Mortgage
French mortgage law was overhauled in 1979 and offers a good degree of consumer protection, surpassing English law in some respects.
The lender will then confirm the offer of finance in writing. This will contain similar information to that which would be seen on a UK mortgage offer, such as the lender's details, amount of loan, rate, product etc. Under the terms, the borrower is given a mandatory 10-day cooling off period before he/she can accept the offer. This then gives you the buyer the chance to compare the offers and decide which French mortgage suits you best.
The borrower then has 30 days to confirm acceptance of the offer to the lender during which time, the conditions cannot be altered. It is worth noting that in the original agreement with the vendor (compromis) there will be a clause suspensive stating that the purchase will only proceed if the purchaser is able to find a suitable mortgage. Therefore, if he/she is unable to obtain finance, they are not legally bound to complete and they do not lose their deposit.
That being said, it must be shown that every effort has been made to obtain the finance and once it has been agreed, the purchaser is then bound to fulfil the contract. If the buyer has stated at the outset that no finance is required, however, he or she is no longer protected in this way.
After you've got your French Property Mortgage
When you've got your French mortgage, you'll need to organise French Property Insurance! After this you may want a Brittany Builder to renovate your home in France or a compact package sewage treatment plant in France: we know who to see and who best to avoid!