So #Brexit is coming by year’s end. Now is the the time to get started in earnest to buy your home in France for residency.
Here’s a brief guide to help you navigate the French mortgage process.
If you’re thinking of moving across the channel, you should also be starting to think seriously about getting a mortgage in France. With mortgage rates generally still lower than UK averages, buyers are able to stretch budgets, find hidden gems and ultimately get more for their euro. At the moment, if you’re looking for overseas property, UK buyers can find the widest range of finance options in Europe in France, not to mention the lowest available mortgage rates.
A number of French banks can lend to non-French nationals. A buyer can generally borrow up to 70–80% of a property’s value. Though Brexit may change how easy it is for UK citizens to own property overseas, experts are confident that, even after the UK leaves the EU, it’s unlikely there’ll be any restrictions for British people owning French property. This is based on the fact that non-EU citizens currently don’t face any additional restrictions on buying properties in France.
Things to look out for when getting a mortgage in France
How much you can borrow?
The amount you can borrow for a mortgage in France is constrained by both the value of the property and your income.
If your combined credit commitments are greater than 33% of your household income, French banks are not able to give you further credit. This includes all of your liabilities (rents, mortgages and any other regular expenses). If you’re over 65, the banks will only look at your passive income or retirement benefits, or a weighted value of your earned income.
Get your mortgage process moving
The first and most important thing for you to figure out is how much you can afford. From here, it’s a good idea to get the mortgage process going before you’ve even started looking at properties. It is possible to get a non-binding ‘Approval in Principle’ will give you an idea of your realistic budget and exactly how much you can borrow. Once you’ve got this you’ll also be taken more seriously as a buyer, which naturally helps with negotiations.
Know your stuff
French vendors have been known to be concerned about international buyers knowing little to nothing about the French mortgage process and having no financing to back them up. This makes already having the ‘Approval in Principle’ especially useful, with the added bonus of arming you with the right information to conduct your search and not wasting your time looking at properties you couldn’t afford.
It’s also important to figure out whether you’ll be investing as a resident or a non-resident (for example: if you’re planning to use the property as a holiday home), as the mortgage application process, and even the terms and conditions presented to non-residents will be slightly different. As a non-resident you’ll also probably only be able to get a mortgage from the larger French banks.
What you need to provide
The French banks may require additional financial re-assurances when lending to foreign nationals or non-residents which could include opening an account with the bank and depositing sufficient funds for a few mortgage payments. Please also note that a life insurance is normally compulsory to support a loan.
Here’s a checklist of the basics you will definitely need to provide:
- Copies of your passport(s)
- Proof of income
- Bank statements from the last three months
- A current rental agreement
- A statement of assets
Here are some of the extras you might need to have, depending on your situation:
- Executed sales agreement for the mortgage offer (not for a preliminary commitment)
- Audited financials over three years (if you’re self-employed)
- Written estimates or invoices from French-registered tradesmen and copies of their certificate of insurance (if the property will be renovated or is new)
- A property title or preliminary sales agreement for the land, building license, and the building contract and plans (if new improvements are to be constructed on the property)
- The title deed or loan deed with a complete repayment table (if the property is to be financed with a re-mortgage or equity release)
Presently there are no UK retail banks that will lend in France, so the only lending solutions are provided by the French retails banks. Each bank applies their own criteria and the process is very labour intensive with further potential complications with the language and culture barriers.
It is therefore advisable to appoint a specialist broker who will be familiar with the exact mortgage application requirements and can find you the best possible deal. You can save a lot of time, cost and hassle if you work with someone who already has an overview of any restrictions and administration requirements.
How much will a mortgage in France cost?
During your planning phase, it’s a good idea to get a solid understanding of the different fees that might be involved in a mortgage agreement. This can include things like a 1% origination/arrangement fee, Notary fees are fixed by law for the most part, and can be between 6–8% for a used property, or 3–5% for properties for a new-build/ off-plan.
A 10% deposit is usually payable to secure your sale which, along with the fees you might need to pay, may mean making large international payments to your notaire (solicitor) and the local authorities in France. It’s important to keep an eye on this as fees and taxes can get close to 10-15% of the total cost of the property.
Seek advice when getting a mortgage in France
It’s definitely wise to shop around when it comes to mortgage lenders. This will help you to find the best mortgage interest rate.
Even if you choose to take out an additional or new mortgage in the UK to buy your overseas property it’s still wisest to seek specialised legal advice. If you’re still unsure: it’s always best to get independent advice. Investing in someone to help you get the best value for your money will be your greatest support while investing overseas.
Property Insurance in France
You will also need to take property insurance on your new home in France, so have a look at an overview of the ins & outs of property insurance in France, here.