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Mortgages for Expats in France

Author: Jim Newham
Submitted: December 2013

Mortgage rates in France are at around 4% APR, the lowest they have been for more than six decades. Though traditionally conservative, French lenders are becoming more receptive to foreign property buyers. You may still be refused a mortgage once or twice, but if you persist, and shop around, you should be able to find a good deal. Some lenders are mortgage specialists; these may be able to help you if you have unusual circumstances.

If you want to bolster your chances of the vendor accepting you as a buyer, you can obtain a mortgage agreement in principle. In France, this is called a pre-approval mortgage certificate. Having a French bank account which has had regular sums paid in for some time will increase your trust with the lender.

In France, if you struggle with repayment, you are protected. If you find that you are unable to make regular repayments, the lender will not immediately take steps towards repossession.  They are legally obliged to discuss the matter with you and do what they can to reach a solution. This may involve granting you a brief payment holiday or a reduction in your monthly instalments.

Requirements

As with many aspects of French life, the mortgage system is highly regulated. You will need to have all the correct documentation (see below.) In addition, the total debt you pay including mortgage repayments is strictly limited to approximately a third of your qualifying net income. Your income is also expected to be stable, that is, either from a consistently successful business or from a steady job.

There will also usually be a minimum loan, which can be from €50,000 to €100,000.

Terms

Foreign borrowers can generally expect a loan-to-value ratio (LTV) of up to 80%. This is quite generous, as in most other countries this figure is normally lower. The full repayment period of the mortgage is generally 30 years or up to retirement, whichever comes first.

Mortgage types

Fixed-rate mortgages account for about two-thirds of all mortgages. Some fixed-rate mortgages have flexible repayment options available, in which you can vary the amount of your payments by up to 30% or take a payment holiday for up to two years.

Variable mortgages are less common, partly because they often have pre-payment penalties attached. With this mortgage type, the interest rate is pegged to the Euro Interbank Offered Rate (Euribor for short). Interest rates in France are at from 1% to 3% above the Euribor rate. You can find the current Euribor rates here:

https://www.euribor-rates.eu/current-euribor-rates.asp

There are three broad types of mortgage available in France. The first, known as the conventional mortgage, the hypothèque conventionelle, is not actually that popular. This is because it is inflexible in some ways and incurs several fees, including stamp duty and registration with a notary at 2% of the principal.

A more popular type is the priority lien charge, so called because takes priority over all other mortgages that exist on the property in question. The priority lien charge is cheaper than the conventional mortgage, because notary fees are only chargeable at 1% and no stamp duty is payable. However, this type is only available on older properties.

The third type of mortgage is made in association with a bonding company (société de cautionnement). The bonding company acts as a guarantor if you fail to make a repayment. This type is only available to those who are ‘fiscally resident’ in France. To be fiscally resident, France must be your main home or main centre of economic activity. Additionally, you must have a good credit score and a steady income.

Application

In addition to the mortgage application form, documents you need to apply for a mortgage as an employee include:

  • passport
  • birth certificate (and marriage certificate, if applicable)
  • tax certificate
  • proof of income: 3 months’ payslips
  • sale contract
  • proof of deposit
  • letter of reference from your bank
  • letter from your employer confirming length of employment and salary

 

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