If you’re in a position where you can afford to buy your dream South of France property outright, you’re in a lucky minority. Most people who have made the life-changing decision to purchase overseas will have to seek out a mortgage.
Finance is never the most straightforward topic, but dealing with the laws and regulations of another country makes it especially complicated. This short guide should provide you with some practical advice and give you an understanding of how you can acquire a property loan.
Is it Possible to Obtain a French Mortgage as a Non-Resident?
Yes — though it’s likely to take a bit longer than if you were already living in France. One way you can speed up the process is to open a french bank account and begin making regular deposits. This should also help when it comes to proving your ability to keep up with mortgage repayments.
Mortgage rates in France have traditionally been favourable when compared to the UK, and there has been a significant boost over the past few years in the number of banks offering bilingual services, which will of course make the application process simpler.
What do I Need to Get a French Mortgage?
French lenders do not use UK credit scoring data, they instead assess applications using proof of income. Three consecutive months of records will be needed as evidence of your suitability, but two years will be needed if you’re self-employed.
A standard debt to income ratio of around 30% is used to assess the majority of applicants. This means that approximately a third of your monthly income can be taken up with existing loan repayments and the proposed french mortgage.
You also need to have already signed a sales contract for your South of France property. In many cases, a sales contract will not be provided until you have obtained pre-approval. Liaise with your french bank advisor and request a ‘mortgage in principle’ certificate which will state how much the bank is willing to lend you and can help you in your negotiations with the property seller.
In addition to the above, you are also likely to need some or all of the following pieces of documentation:
- Current passport
- Marriage certificate
- Recent tax certification
- Proof of deposit
It is important to note that if you’re married or in a civil partnership, both partners will be liable for the mortgage repayments, regardless of whose name it’s in.
What are my Options?
French banks have kept their lending policies consistent. You can choose between fixed and variable rate, though fixed rate tends to be far more popular. Look out for variable rate mortgages that have capped monthly payments. These are known as prêt modulable or flexible mortgages which will lengthen if the interest rates increase beyond a certain point.
The typical maximum loan-to-value for applicants is 85%. A loan for the entire property value is possible with loans above €300,000 if you can prove your annual income is above €90,000.
“Interest only” mortgages are rarer in France than in the UK, but they do exist, so make sure to do your research and look for the option that best suits your circumstances.
What are the French Mortgage Types I Should Know About?
Various costs are attached to different mortgage types. There are three options in France:
-
Hypothèque conventionelle/Conventional charge
There are relatively high notary fees attached to conventional french mortgages. As much as 2% of the purchase price will need to paid with this option. It’s also important to know that you may be subjected to additional fees if you resell or pay off your mortgage too early, so avoid this mortgage type if you’re hoping to resell your South of France property within two years.
-
Hypothéque de privilège de prêteur de deniers / Priority lien charge
This tends to be a good choice for purchasing older properties with a longer-term mortgage. However, it can’t be used for new construction, renovation or the purchase of land with the intention of building your own property. Notary fees are typically around 1% and terms can stretch to as much as 50 years depending on your circumstances. As with conventional mortgages, you will be liable to an additional fee (around 3%) if you resell within the first two years.
-
La société de cautionnement / Institutional guarantee
This option is only available to french fiscal residents, but if you have a good credit history you may be able to attain a mortgage under institutional guarantee. These tend to have a cheaper fee structure and can be quicker to arrange. There’s also no penalty for paying this one off early so it’s a good choice if you’re looking to resell shortly after purchase.
We hope this guide has been useful in helping you choose a mortgage for your South of France property. If you have any questions or need someone to help you navigate the purchasing process, Charles Mackintosh, a chartered surveyor with 30 years of experience dealing with french property, can help. Get in touch on mackintoshfrance.com.