How a French mortgage works

French mortgages are available for the purchase, renovation and construction of a property.

Re-mortgages are also available, but when compared to the UK, they can be very costly.

• Under French Law, all mortgages are full status and lenders are obliged to ensure that a person applying for a mortgage is financially able to meet their repayments.  Proof of income and outgoings are obligatory and you will be asked to provide at least three monthly payslips and bank statements.
• A mortgage of 80% of the purchase price is normal, but may be higher depending on your status as a purchaser.  Legal fees are generally between 7-8% of the purchase price but they can vary between 3% & 13%.  The mortgage must be secured on property.

Valuation

A valuation of the property is carried out, but not in the way you will be used to in the UK..  The valuation is only based on whether the property is worth the purchase price and does not involve any kind of structural inspection at all.

Length of Mortgage Term

French mortgages are repayment loans and the maximum term available is 20 years, or up to the age of 70 (whichever is the earlier).  Life insurance is required by French law to cover the loan and existing life policies are not generally taken into consideration.

Two Types of Mortgage:

The Variable Rate Mortgage

The variable rate mortgage is linked to the variations in the central bank lending rate.  However, the monthly payments usually remain the same when rates change and the mortgage term will vary according to the rates movement.  There is usually no early redemption charge and you may be able to convert it to a fixed rate mortgage at any time, but this option is again dependent on the lender.

The Fixed Rate Mortgage

The fixed rate mortgage is fixed for the whole term, so you will know exactly how much you will have to pay and how many payments you will make.  There is an early redemption charge payable on fixed rate mortgages.  Some lenders may not allow the option to convert it to a variable rate mortgage at a later date.

The Amount of the Loan

The amount you can borrow is based upon your ability to service the loan.  The general guideline is that  33% of your net monthly income should be sufficient to cover existing outgoings, plus the monthly costs of your new mortgage and life insurance cover.  Outgoings are liabilities such as mortgage or rent in the UK, personal loans and maintenance commitments.

• If you are employed, the lender will base income on evidence of your payslips and the amount credited to your bank account on a monthly basis.
• If however, you are self employed, your income is assessed from your accounts as the average of the last three years net income.

Additional income from investments or rentals will also be taken into consideration.

If you would like to receive an illustration of the possible monthly costs and the maximum you can borrow in France, please complete our enquiry form and we will contact you with the information.

Lenders Arrangement Fee

The lender will also charge an arrangement fee.  Each lender has a different scale of fees, but generally the charge will be 1% of the total mortgage, subject to a minimum and a maximum charge.  The fee is usually payable when you return your acceptance of the mortgage offer.

Life Insurance & Buildings & Contents Insurance

Another requirement is to take out a life insurance policy for the duration of the mortgage with a life assurance company approved by the lender.  Life insurance to cover a mortgage is mandatory in France and a quotation should be submitted with the mortgage application form.  After receiving and signing the mortgage offer, the life policy will start as soon as you have committed yourself to purchasing the property.

• Buildings and contents insurance need to be in place on completion of the purchase
  
  Your Notaire will ensure that all the necessary legal work is complete and that you have been granted a mortgage as well as having your life insurance and buildings and contents insurance in force before the deed of sale (Act Authentique de vente) is signed.
   
• There are fees that are now payable such as Transaction Charged and the Notaire's fees.