Expat mortgages in France

Expat mortgages in France

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Looking at French property for sale? Make sure you're aware of the rules of expat mortgages in France before you buy your dream French property.

If French property for sale is catching your attention, it is good news there are no restrictions on foreigners buying French property nor getting an expat mortgage in France, although different mortgage rules and tax implications apply depending on whether you are a resident or non-resident in France.

Due to France's popularity as an expat destination, foreigners looking to take out a French mortgage as an international or expatriate buyer will find that most major French banks and real estate services cater to this demographic. There are also specialist property lenders that might include English-language assistance and specialised expat mortgage services. Read more in our guide to French mortgages.

What can restrict your French mortgage is your salary. The single most important element in successfully getting a mortgage in France is income, as explained below.

Are expat buyers still welcome in France?

In recent years, France's banks have become increasingly willing to offer mortgages to foreign buyers, meaning international buyers don't need to rely on remortgaging an existing property or using an international lender in their home country; arranging a French mortgage will typically work out cheaper for funding your French property.

Although there were concerns that French banks might be reluctant to lend following Britain's vote to exit the EU, the post-Brexit situation in France appears to be the opposite. In an effort to draw potentially reluctant foreign buyers, French banks are putting together even more attractive packages and experts predict interest rates could decrease as a result.

Banks in France are still offering foreign buyers 20-year mortgages at interest rates as low as 2.15 percent, lower than seen in some neighbouring countries. A fluctuating pound is in some part compensated by the record low interest rates, alongside relatively affordable property prices particularly in rural areas. Property in Paris has emerged from the financial crisis as one of Europe's core performing markets, and although prices are being pushed up there are still affordable opportunities when compared to London or New York, for example.

For British buyers, one potential effect of Brexit is that they may get higher restrictions on how much they can borrow, from the typical 80 percent offered to EU citizens to as low as 50 percent sometimes limited to non-EU citizens. However, as British buyers make up the biggest percentage of foreign property buyers in Frace, experts predict banks will continue to look favourably on British applicants regardless of the Brexit outcome.

Requirements and tips for an expat mortgage in France

  • A command of French or a translator is typically required for certain aspects of the buying and mortgage process, for example, documentation might be in French.
  • The advantage of getting a French mortgage is that the French property you are purchasing can be used as security, which is not usually available with an international mortgage.
  • The amount you can borrow in France is restricted by your income, so it's important to calculate the legal maximum you can borrow before you look at French properties.
  • French loans can be for between 5 and 25 years (but most commonly 15 or 20 years), depending on your age and the bank you've chosen. It has been possible before to borrow up to 30 years, although age is a factor and this has been rare following the crisis.
  • French mortgages typically cover around 70–80 percent of the purchase price.
  • Life insurance is normally required by French banks to take out a mortgage.


How much can you borrow?

There are no ‘self-certification' loans nor non-doc (‘sub prime') loans in France, therefore, you need to prove you are receiving a regular income that can cover all of your debts three times over. This is because strict Banque de France lending laws state that your total debt cannot exceed more than one-third of your total income. In some circumstances, depending on the bank, you may get a slightly larger margin but this is never more than a few percent. So if you earn EUR 3,000 a month as a salary, then the total of all your mortgages (including the new one), credit cards, loans and other debt repayments cannot come to more than EUR 1,000 per month.

Other personal circumstances can push up or down the mortgage amount you are allowed to borrow. If you're already paying tax in France, you may be able to borrow up to 100 percent of the property purchase value (ie. sale price less estate agency fees), although this is rare following the financial crisis. UK and other EU residents/taxpayers may be able to borrow up to 85 percent, although 80 percent is typical. Non-EU residents/taxpayers may eligibile for a mortgage of up to 80 percent, but this ranges greatly between banks and can be as low as 50 percent of the purchase price.

French mortgage calculations

Based on the income and deposit requirements, below is an example of how to calculate your French mortgage requirements and how much income you need.

Purchase price EUR 300,000
Deposit of 20 percent EUR 45,000
Notary fees (approx. 8 percent) EUR 24,000
   
Total cash needed: EUR 69,000
Mortgage: EUR 255,000

 

The repayments for this mortgage over 25 years at 4 percent would cost EUR 1,345 per month, plus approximately EUR 80 a month life insurance.

This would mean that you would need to prove an income, after all other debts, of EUR 4,000 per month, or approximately EUR 48,000 per annum.

Depending on which bank you approach, this figure may be taken from your net or gross income.

Costs of an expat mortgage

The notary fees tend to work out at around:

  • 6 percent in government taxes (such as stamp duty);
  • 1 percent in notary administration fees; 
  • approximately 1 percent of the mortgage amount assignment fee, if you are taking a mortgage to assign the bank's legal interest in the property.


As the buyer you need to fund the deposit (minimum 20 percent) plus the notary costs (approximately 8 percent).

French mortgage interest rates

All mortgage interest rates in France are linked to the Euribor (Euro Interbank Offered Rate), which was introduced at the beginning of 1999 along with the European single currency (the euro), because European banks considered that it was necessary to establish a new interbank reference rate within the Economic and Monetary Union. Click here for more information.

What types of French mortgages are available?

Variable interest rate mortgages
These are based on the lending bank adding a margin to one of the Euribor indexes, normally the 3-month or 12-month rates. They are typically fixed for anything from the first three months to five years, then go up or down as the market index moves. Some banks do offer variable rate mortgages that can safeguard against rises in the interest rate by capping the maximum rate, or by extending the term of the loan rather than raising the monthly payment. Most products also give you the option to convert to a fixed interest rate at any time.

Fixed interest rate mortgages
The repayments with this type of mortgage are fixed for the whole term of the mortgage, so you know exactly what you will be paying each month over the whole term of the loan. However, fixed rates are usually higher than variable rates and there are normally larger penalties for paying off your mortgage early than you would have with a variable interest rate mortgage. However, as Europe continues to experience historically low-interest rates, today buyers have less risk for locking in a long-term, record-low interest rates.

Interest-only (prêt infiné) mortgages
Hugely popular in the UK and US, interest-only deals are becoming more available in France if you want to reduce the monthly repayment to a minimum. However, there are some differences with the products in other countries:

  • Assurance vie (life assurance) linked: With this loan, instead of placing your deposit into the property, you take a 100 percent interest-only loan and are obliged to place the deposit (minimum of 20 percent) into a French investment scheme which runs alongside the mortgage. These schemes can have significant inheritance planning advantages and can offer flexibility if you are going to buy and sell a lot of properties, as they can be kept as the deposit for the next purchase.
  • Dual phase: Some banks also offer a product, which is interest-only for the first few years of the mortgage and then becomes a repayment loan for the remaining. This is particularly useful if you believe you will pay off large sums in the first period.
  • Asset-backed: This is an interest-only product which does not require a deposit into an investment scheme and does not have a second repayment phase. You simply need to provide evidence of your other net assets up to a value of between 120 percent and 150 percent of the loan amount.


Buy-to-let mortgages
For anyone looking to purchase on a buy-to-let basis, this type of mortgage does not really exist in France. Future rent can be taken into account but the bank will normally devalue the property by 10 percent and then lend 85 percent of the 90 percent valuation, meaning a larger deposit is needed. The bank will also only take 80 percent of possible 'long-term, unfurnished' rental income into account, which is considerably less than what you will probably achieve through seasonal weekly lettings.

Bridging loans (Prêt relais)
This is a loan for those purchasing a property in France who have yet to complete the sale of their existing French property. In most circumstances the loan is available for up to two years pending the sale of the existing property (although exceptions exist), as long as there is enough equity in it. The loan may be up to 70 percent of value of the existing home. The borrower generally only pays the interest element of the loan, with the capital being paid off on sale of their present property.



Expatica

This information is provided as a guide only. If you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different. Based on an article by Expatica expert Steven Grover; updated 2016.

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