Mortgage rates in France are typically lower than those in the UK, currently starting at about 3.9 %. French banks will offer fixed rate or variable rate on capital repayment mortgages and generally lend up to 80% of the purchase price before tax. One or two banks offer interest only mortgages and 100% mortgages. As a rule, to be eligible for a French loan, your debt ratio must be no more than 33%, i.e. that all your monthly debt repayments should amount to no more than a third of your monthly income.

French Mortgage options

When buying a second home in France, there are three ways to raise the mortgage:

• against an existing property in your country, providing there is sufficient equity;
• against the French property;
• a mixture of both.

Mortgage on your main home

Raising capital against your principal residence is the cheapest and most straightforward option.  The funds are raised either by taking further borrowing on the current mortgage or by re-mortgaging to another lender and increasing borrowing that way.  The fees involved are comparatively small and the process is comfortingly familiar.  However, this option does rely on there being sufficient equity in the property, and some people are uncomfortable with the idea of using the family home as security on a holiday property.

Mortgage on your French Property

Raising a mortgage secured against the French property allows buyers to purchase a property without putting their principal home at risk.  Although the costs are higher, it is an attractive option, with historically low interest rates.  There can also be tax advantages if you let out the property.

Mixed mortgages

Finally, raising money against your principal home and your French property is popular with purchaser who do not have large deposit in savings or who want to keep their savings intact.  Basically, the deposit and costs are raised on your principal home, limiting the amount of equity; while the difference is raised against your French property.

French Mortgage calculation

The French Mortgage calculations vary slightly between the lenders, with some having a higher minimum loan size or lower maximum loan value.  Overall, though, French lenders are cautious.  Banks generally consider loans from between 65 to 85% of the value of the property.  Typically the calculation works on the principal that the total of the French mortgage plus any other borrowing or rent should not exceed a third of the buyer’s gross monthly income.

French Mortgage products

Mortgages are normally offered on a capital and interest method and are granted over fifteen to twenty five years period, depending on the Bank and the amount borrowed. Both fixed and variable rates are common in France.  Variable rates are usually based on the Euribor (European Inter Bank Offer Rate) plus a loading. It is normal for the applicant to be charged a fee by the lender, which is typically 1% of the amount borrowed, although this figure varies and is usually capped for larger loans. Most banks also insist on a professional survey, the cost of which will vary depending on the value of the property. Most lenders will insist that buyers take out some form of life/disability insurance.  Building insurance is also needs to be taken out to protect the lender’s interest.

French mortgage application process

When you approach a French bank for a mortgage you will need to supply all the following documents:

• Copy of valid passport or identity card
• Copy of telephone (land line) or gas bill or electricity bill
• Copy of birth certificate
• Copy of marriage certificate
• Statements for all bank accounts for the last three months
• Contracts and repayment schedules for all current loans
• Proof of principal residence (e.g.  a council tax bill)  or copy lease with receipt for last rent payment if you are lessees
• The last three wage slips -   and the contracts if employed for less than 18 months
• Copy of latest tax return or official statement of income at the end of the last year
• Proof of the amount of personal capital contribution to the purchase (e.g. savings account statement)

The bank will study your dossier and if all is in order, make you a preliminary offer.  This should take no more than 48 hours from their receipt of the papers.  They will then send you documents for you to open an account with them (if you do not already have one) and also an insurance policy (together with health questionnaire) to sign.  The bank account is a current account (for the purposes of transfers of money related to the loan). You are obliged to have a French bank account if you are to have a French loan.  The insurance policy is similarly obligatory. It insures the loan and must be signed and sent back at the same time as the offer document.

Your dossier will then be sent for final approval. Then you will receive your offer documents.   You must keep the envelope in which these are sent;  it is needed to prove the date of receipt and you will often have to use it to send back your papers.  French law gives you a period of eleven days in which to reflect and thirty days in which to sign, which start from the date you receive the papers.  You must therefore return the papers after day 11 and before day 30.

French Mortgage charges

The bank charges for arranging a mortgage are:

• administration  -  a flat fee of approximately 1% of the loan amount.
• the cost of the garantie hypothécaire or mortgage registration - amounting to approximately between 1.5% and 2% of the loan amount.
• A mortgage broker will typically charge you either a flat fee (usually several hundred pounds/ Euros) or a percentage (around 0.75%) of your total purchase price. Buy To Let Montpellier will organise your loan for no fee as part of their service.

See also Buying a house in France and French Property Taxes.

Paddy Gibbins is the Managing Partner of Buy To Let Montpellier. His company specialise in helping Property Investors find suitable investment properties in the South of France. Paddy also has extensive contacts with reputable Real Estate agents across the South of France. If you are visiting the South of France to view property, Paddy is excellent at developing property viewing schedules that meet your requirements. You can contact Paddy at: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Tel: +44 (0) 870 800 3232
Mob: +33 (0) 6 26 67 43 76
www.buytoletmontpellier.co.uk