International Mortgages

French mortgages: a beginner’s guide

By Becca Talbot becca@consumerchoices.co.uk

Famous for its fine wine, cuisine and cultural heritage, France really does have something for everyone... (Updated 24/9/09)

From the chic elegance of Paris, to the hot Cote d’Azur in the south, France is a popular destination for retirement, holiday homes and property investment. While the thought of getting a French mortgage may seem daunting, it’s actually quite simple once you have the know-how.

Here’s our basic guide to French mortgages, explaining everything you need to know if you’re considering buying a property in France.

• French mortgages: the basics
• Using a notaire
• Who can take out a French mortgage?
• Am I eligible for a French mortgage?
• Renovation and construction loans
• Société Civile Immobilière
• Our Recommendations

French mortgages: the basics

If you’re thinking about buying a house in France, it’s important that you understand the basics, as purchasing property abroad and getting a mortgage deal isn’t as straightforward as taking out a mortgage in the UK.

Typically, French mortgage lenders require a cash deposit of 20% of the total purchase price and renovation costs. In some cases, this can be reduced to 10% depending on your situation. The maximum loan-to-value (LTV) available for a French mortgage from International Personal Finance is 90% of the purchase price, which can include estate agent’s fees, however not notaire’s (solicitor’s) fees.

Read our guide for more information on taking out a French mortgage >>>

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Using a notaire

When buying a property in France, a notaire will be used to ensure that all the sales proceedings comply with French property law. One big difference between a solicitor in the UK and the French notaire is that the notaire is there to assist all parties so the process of selling and buying the property runs smoothly.

The notaire is also responsible for receiving all contracts and checking their authenticity. A notaire is used whether the property being bought is directly through the notaire, or through a French estate agent. You do not have to choose your notaire; they are allocated and are usually local.

Some British buyers feel uncomfortable using a French notaire and use a UK-based mortgage adviser, specialising in French law, to check the paperwork, although this will cost more. Other buyers appoint a second notaire – there is no reason why you cannot do this, and, as long as the two notaires are able to share the work, it need not cost more.

If you’re buying a property in France, your notaire will be happy to advise you on specific things, such as helping you choose a suitable regime for purchasing in order not to fall foul of French inheritance laws.

Read this article for more information on the role of the notaire >>>

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Who can take out a French mortgage?

You can take out a French mortgage for the purchase of a new or existing property, a Gite (a holiday home that you rent out), or a property on a Leaseback scheme. Leasebacks are freehold real estate developments sold “off plan” (before they are built) that come with a full management contract.

To take out a French mortgage, it will need to be secured against a residential property in France. As French mortgages are full status, proof of income and outgoings will be required to submit an application to a lender.

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Am I eligible for a French mortgage?

Lenders will assess your eligibility for a mortgage on your ability to repay the money you borrow. As a rough guide, when applying for a French mortgage your existing monthly outgoings, as well as the monthly repayment on your new mortgage, should not exceed 33% of your gross joint monthly income, less any existing liabilities:

Example Assuming the gross monthly income is £5,000 and liabilities are £1,000, the maximum payment available towards a French mortgage would be £650 (£5,000 x 33% = £1,650 less £1,000 liabilities = £650). This would allow you a mortgage of about £123,500 over 25 years, based on an interest rate of 3.85%.

If the property you are buying is an investment, then a percentage of any rental or investment income you receive on it may be considered by some lenders.

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Renovation and construction loans

Renovation and construction loans are also available for new-build properties, once your mortgage has been approved. The funds will be sent directly from the lender to the construction company following the submission of invoices.

To find out how much you can borrow, complete a personalised online mortgage quotation form >>>

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Société Civile Immobilière

French lenders will not give a mortgage to a British company; however it is possible to establish a French company solely for the purchase of a property. This is called a Société Civile Immobilière (SCI).

This type of purchase can benefit groups buying together, and can minimise French inheritance issues. Before you make a decision to purchase a property under an SCI, as with any mortgage, you should seek legal and tax advice.

To find out how much you can borrow, complete a personalised online mortgage quotation form >>>

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Our Recommendations

Chris Eagle, commercial editor at CreditChoices.co.uk suggests speaking to a professional adviser specialising in French mortgages before signing up to anything: “International Personal Finance has provided French mortgages to British customers for many years. If you have your heart set on a property in the French countryside, or are just beginning your search for a holiday home on the Mediterranean coast, their professional advisers can guide you through the process of arranging your mortgage.”

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