The ABC of French Mortgages
Amortissable: A standard repayment mortgage where the capital and interest is paid off over a fixed number of years. Many French mortgage banks will allow you to keep the monthly payments constant and increase the term for a maximum of five years in the event of a rate increase.
Bank Arrangement Fees: These vary from bank to bank, from around 700 Euro minimum up to one percent of the loan amount.
Compulsory Mortgage Protection Insurance: This requires filling out medical questionnaires and depending on the amount and your age can involve a visit to your doctor for the required medical reports. All costs are usually reimbursed by the insurance group. The cost of insurance is between 2.5 and 5 Euro per every 10.000 Euro borrowed per month.
Down-payment: Minimum down-payment is usually 20 percent of the purchase price for a non resident. Do not be surprised if your bank asks you for 30 percent before issuing the loan offer.
Debt Ratio: French Mortgage providers, as a rule of thumb, require that your total monthly outgoings on all loans do not exceed 35% of your total monthly revenues. This ratio includes the amount of your new French mortgage.
Endowment Mortgages: Normally 30 percent is required to be invested in a bank approved investment bond. The bank will then offer an interest only mortgage using the investment bond as collateral for the loan
Flexible Repayment Mortgages: French mortgage providers will impose different conditions on your flexibility in repaying the mortgage. Make sure you are fully aware of the conditions before you sign the loan offer. In most cases it is possible to negotiate in-built flexibility to allow you to pay-back all or part of the loan without incurring penalties.
Available Rates: Variable first year rates are from as low as 2.5 percent. Fixed rates from 4.10 percent. Variable Rates are pegged to the Euribor 1 month, three month, six month, or twelve month index plus the bank’s margin, which can vary from bank to bank from between 1.20 and 2.5 above the Euribor index.
House and Contents Insurance: This should be in place when you take delivery of the property.
Interest Only Loans: Normally available with 20 to 30 percent down-payment in two phases; the first phase of between 5 and 10 years, and the second phase of repayment of interest and capital of between 10 and 15 years.
Joint Applications: In general, the same names that appear on the Promesse de Vente or Compromis de Vente should appear on the French mortgage application.
Key documents: A full list of documents required can be found on this website. However in addition to these should you receive rental income on existing property the bank will need to see tax returns showing this income as well as tenancy agreements.
Loan Offer: The document the bank will send you once your French Mortgage has been approved by the bank’s lending committee. A copy of this document will be forwarded to your notaire to allow him/her to prepare the title deeds.
Mortgage Broker: A window to a panel of lending banks to which we can forward your loan application. We can tell you all costs and charges associated with the loan application and will act as a liaison between yourself and the lending bank. Every mortgage broker in France receives a commission direct from the bank, so there is no reason to charge additional fees to the client.
Notary Fees: A combination of legal fees, and government stamp duty, and land registry totaling around 5 percent for new constructions and between 8 and 10 percent for resale property. Your notary should be able to give you a complete breakdown of fees.
Onze jours: Upon receiving your French mortgage offer you must by law wait a period of 11 days (“onze jours”) before accepting the offer and sending it back to the bank.
Proxy: It is possible via the services of your notaire to sign for the property by proxy. There is small fee for this service
Quote: Please contact us for a no obligations French mortgage quote and consultation.
Required Documents: French Banks will require passports, proof of income, proof of residence, three month’s bank statements and an explanation of all existing mortgage payments and direct debit payments. The requirements differ for employed and self-employed applicants.
Signing Date: The date set by the notaire for signing the title deeds to the property. This date can only be set once the notaire has confirmation of the loan offer.
Term: French mortgages are available from 7 to 25 years for non-residents
Valuation: Most French banks will undertake a property evaluation at their expense. For a resale property it is advisable to commission a structural survey.
V.E.F.A: French for new build properties. It is possible to arrange finance for the construction period. Remember that your down-payment will be required to be paid to the developer via the notary at the start of the construction period, not at the end.
Wide Range of products: In France, your purchase can be secured by a variety of mortgages and financing options: Interest Only, Endowment, Flexible Credit (part of the term interest only part standard repayment), Standard Repayment Variable Rate and Fixed Rate Mortgages.
Xchange rates: Consider using the services of a currency exchange dealer for lump-sum transfers and regular transfers from foreign banks. They generally offer better rates that the high street banks and can fix rates for up to 2 years at a time.
Editors note: Matt Frost, Principal and Director of French Mortgage Xpress, a leading mortgage broker providing comprehensive financing services to property buying clients throughout France.
French Mortgage Xpress is a mortgage broker dedicated to obtaining Euro mortgages for residents and non-residents at the best rates and within the fastest possible time. Because of the volume of loans processed by FMX with French mortgage providers, FMX can negotiate best rates and fastest turn-around times for FMX clients. All types of loans are available including standard repayment, fixed interest, and interest only for up to 25 years. For more information, or to arrange the financing of your French property, visit FMX on the web at www.frenchmortgagexpress.com or fill out our Enquiry Form and FMX will contact you with a quote.
