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French Mortgage Questions Answered

France - French Mortgage Questions Answered

How much can i borrow?

As a non-French resident, you are able to take out a mortgage in France (restrictions may apply for people living in some countries outside of the EU) if you are buying a property there and providing your mortgage application falls within the lender's criteria.

Generally, French lenders will lend between 70- 80% of the purchase price for non-residents, although different lenders have different criteria. Up to 100% mortgages can be obtained in some circumstances. Some lenders will also lend on the estimated notary fees (notary fees in France can range between approximately 3 - 10% depending on whether or not the property is a new build and therefore benefits from reduced fees, or resale). Due to French consumer law, lenders have to assess how affordable it is for you to take on a mortgage. To do this, they will take into account any existing loans, mortgages, outstanding credit card balances which are not paid off in full at the end of each month, child maintenance, rents etc. that you may have as fixed outgoings. They will compare this with your income and providing that your outgoings (including the mortgage for which you are applying) do not surpass 33% of your gross income (some lenders will look at 33% of your net income) then your application should be successful. Lenders have become more flexible in recent times, and some lenders today will lend up to 45%. Each lender will assess an application in a different manner depending on in-house policies.

What happens if I am self employed?

The question is often asked whether those who are self employed or company directors can obtain a French mortgage. The answer is often yes, but it is impossible to speculate as each case is often very different. Generally, a minimum of two years of audited accounts are required.

What interest rates are used in France?

French mortgages are based on the Euribor index (EURIBOR stands for Euro Inter Bank Offered Rate) and are either based on the Euribor 1 Month, 3 Month, 6 Month or 12 Month Index. To find out more about the Euribor, please visit the official website: http://www.euribor.org

What about Buy to Let and Leaseback Properties?

A significant number of people purchase buy to let and leaseback property in France as these are attractive investment alternatives to buy to let property in their home countries. Some lenders will take into account a % of your future rental income from leaseback or buy to let property. In the case of buy to let property you will need to sign a management contract with a lettings agency for this to be taken into account.

For leaseback property, the question often arises whether lenders will provide a mortgage on the VAT exclusive purchase price or the VAT inclusive purchase price. The answer to this question is that it depends. Some lenders will lend on both the ex VAT (called HT in French) and the inc VAT (TTC) prices depending on whether or not the developer is advancing the VAT (only a small percentage of developers advance the 19.6% VAT rebate associated with new build leaseback property). Some lenders will let you keep the VAT rebate when it is refunded while others will ask you to use it as to make an early repayment to your mortgage.

Is life insurance required?

It is mandatory to take life insurance in France to cover the mortgage. The standard process is that this is arranged at the time of the mortgage and most lenders will only accept an application if this is the case. For those wishing to put down a larger percentage of the property value, life insurance may not be required although this is rare. Some lenders may allow you to use a UK based policy.

Arrangement fees and valuations

The French Mortgage market is a lot less competitive between lenders than the UK market, and most lenders only have a handful of products on offer compared to UK lenders who may have a dozen or so at least! All French lenders will charge a set up fee (often called Frais de Dossier) which can either be fixed, or a percentage of the loan taken out.

French bank accounts

If you take out a mortgage in France you will need a French bank account for your direct debit payments. It is advisable to set one up at the same time as you make your mortgage application.

How long does an application take?

If you are applying for a French mortgage you will be required to provide numerous documents such as your last 3 months bank statements, savings accounts statements, mortgage statements etc. Providing that the application you file is complete and no documents are missing, a mortgage offer can usually be issued within 2 - 4 weeks. A typical example of required documents would be:

- Copy of their passport
- Last two years P60s or tax declarations
- Last three months wage slips
- Last 2 or 3 years accounts for self employed applicants
- Last 3 months bank statements
- Mortgage and Loan repayment schedules and/or statements
- Any relevant document showing the personal contribution (deposit)
- French bank account details
- Proof of rental income for any buy to let properties already owned

You will also be asked to supply copies of your reservation contracts and lease agreements as well as plans for the property you are purchasing.

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