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International Mortgages
Top 10 tips for mortgages in France
Updated: Monday 28 November, 2011
By Martin Fagan
If you want to get a French mortgage, these top 10 tips are designed to help you.
It’s getting more and more popular to use a French mortgage to finance your property purchase in la belle France, as interest rates are low and a second property can make for a good investment.
Here are ten great tips to make sure your purchase and the mortgage approval process runs smoothly.
- Plan ahead
- Know your budget
- Add up the costs
- Consider exchange rates
- Open a French bank account
- Use a mortgage broker
- Understand French inheritance complications
- Make a verbal offer first
- Avoid redemption penalties
- Think carefully about remortgaging
1. Plan ahead
If you are planning to rent out the property you are purchasing, you need to do your homework. You should ask yourself:
- Who will rent out the property for you (agency, leaseback scheme, or doing it yourself)?
- Do they have good references?
- What legal implications do you need to be aware of (how do you end the lease if you want to use the property for other purposes)?
It can be very difficult to manage a rental property from abroad if something goes wrong with your management company and you are not ready with a back-up plan, so it is important you consider all your options.
2. Know your budget
Check your budget and make extensive mortgage enquiries before you travel specifically to view a property in France. It would be a wasted trip and heartbreaking to fall in love with your dream home then discover you cannot borrow the amount you need to buy it.
3. Add up the costs
Typical costs when arranging a French mortgage are:
- Lender’s arrangement fees, which can be either a standard flat fee or a percentage of the mortgage amount (typically 1%)
- The notaire’s (solicitor’s) fees and expenses, typically around 7% of the property’s purchased price
- The cost of the mortgage registration and guarantee fees, which are generally between 1-2% of the mortgage amount.
4. Consider exchange rates
If you are buying a property and taking out a French mortgage, but are going to continue to earn your income from outside of the eurozone, you need to weigh up the currency risk and exchange rates associated with obtaining a mortgage in euros.
5. Open a French bank account
To take out a French mortgage, you must first open a French bank account from which your monthly payments can be debited. Unfortunately, like some accounts in the UK, current accounts come with charges in France.
You have two options for your account fees:
- A la carte
- Package
A la carte means you pay for what you use. Though this may sound appealing at first by the time you pay a transaction fee for every monthly mortgage repayment by direct debit, the obligatory fraud insurance and other transaction fees, the package account is less expensive.
Package fees range from €8 to €9 a month and include fraud and theft insurance for your account, internet banking, a cheque book, free direct debits and a debit card that can be used to access money in your account. The monthly payment for the account begins as soon as you open it, and the minimum deposit to open a package account is usually €1,500; however, this can be negotiated.
6. Use a mortgage broker
Using a mortgage broker is a useful way of scouring the market for the best deals, and there are now a lot of bilingual internet brokers that offer services to international buyers.
7. Understand French inheritance complications
You should ask your notaire about any inheritance implications, especially if you are divorced and remarried with children. Whereas in many countries inheritance laws strongly favour the surviving spouse, France grants specific rights of inheritance to the children.
As the tax regime in France is very different from the UK, make sure you seek professional tax and legal advice so your French assets are disbursed according to your wishes.
8. Make a verbal offer first
Don’t sign any paperwork for the property with the vendor or estate agent until you have been advised by your notaire. If you are unsure whether you are paying over the odds, ask your own notaire for advice, as they will be familiar with the actual selling prices for properties in the area.
9. Avoid redemption penalties
French mortgage lenders offer both fixed and variable-rate mortgages. While variable-rate mortgages are generally considered a better deal, they are also more likely to include tougher early redemption penalties, so make sure you read the small print, and get everything authenticated by your notaire.
10. Think carefully about remortgaging
French banks can be quite strict when it comes to remortgaging a property once you have started your contract with them, and releasing equity is allowed by only a few lenders. Remortgaging and equity release can be costly processes and should only be done after taking advice.
| Applying for a mortgage for a French property may seem like a complex procedure that requires lots of paperwork, but a well-prepared application, and the guidance of a notaire will help things go quickly and smoothly, and should result in your obtaining the mortgage you want. |
THINK CAREFULLY BEFORE SECURING ANY DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP
REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.