Mortgages in France – the basics
When you’re buying a property in France, it may be worthwhile to consider taking out a French mortgage depending on your circumstances.
Here is the basic information for considering a French mortgage:
Banks: French banks can agree to a mortgage in principle before a purchase is agreed. Sorting this out early with the bank can give you peace of mind that when you need funds, the bank will make them available. We advise you to open a bank account as soon as you know you are going to want a French mortgage – you’ll get used to the requirement for paperwork and go through the main credit checks although if you borrow from a different bank you will certainly have to go through all the checks again.
Brokers: A broker with knowledge of French mortgages may be able to help you choose the right mortgage for you and help you with the application and paperwork. There will undoubtedly be a fee for this service – either direct or within the fees from the bank.
Deposit: Typically banks will want buyers to provide 20% of the cost price in the form of a deposit. There can be circumstances when they will require slightly less or more but as a general rule of thumb 20% seems to be the norm.
Euribor: The Euro Interbank Offered Rate (Euribor) is a daily reference rate based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market. French mortgages will be linked to that rate.
Fixed Rate mortgages: You can get a mortgage which is fixed for the entire term of the mortgage. Often compared to non-French mortgages the rates can seem quite low. You’ll need to check the small print and penalties carefully. There are likely to be costs involved in making extra payments or redeeming the mortgage.
Immobilier: Estate agents in France are paid by the person buying not the person selling. Typically fees will be from 4-10%. This means if you are negotiating the cost you may need to negotiate with both the estate agent and the seller.
Interest Only Mortgages: Where you pay interest only on the amount borrowed and then pay a lump sum at the end. You can also get a combined interest only/repayment mortgage where the interest only element is paid for the first part and then the repayments follow, often at a greatly increased monthly payment as you “catch up”.
Insurance: In France it is essential to have property insurance before you complete the purchase transaction on your new home. It might sound odd that you are buying insurance on something that technically isn’t yours but that’s the way it is! Your broker may be able to help you with this. You should know that in France if you take out insurance through a French broker, you need to give written notice to end the insurance at least one month before the expiry date. You cannot just stop paying without notice – the insurer can have your name put on a black list for this and, they frequently do as foreigners are often caught out by this law.
Language: It is critical that you understand the terms of your mortgage. If the French bank does not supply translated documents it is important that you arrange to have this done and check for yourself. Your broker may speak perfect French and be happy to translate for you but in our experience it is best to get any translations directly from the bank of independently by a reliable and experienced financial document translator. Banks may use old fashioned, technical language and often appear to use contradictory phrases. The last thing you want is to find out half way through your mortgage that you’ve misunderstood terms and are stuck or will pay penalties you were unaware of.
Notaire: Under French law, notaires are the only professionals legally qualified to handle conveyancing. You may want your broker to liaise with the notaire – especially if the notaire does not speak French – make this clear to your broker from the outset.
Paperwork: Banks require a lot of paperwork from foreigners taking out a French mortgage – always take copies of everything.
Surveys: Property surveys in France are carried out by the French banks lending the money. It is not common for the lender to have a full survey carried out but it is possible. There are English speaking surveyors in France who can provide this service.
Term: A mortgage can be arranged for a maximum period of 30 years or until your 75th birthday whichever is the earliest.