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 is catching your attention, it is good news that there are no restrictions on foreigners getting a mortgage in France, although different rules and tax implications apply depending on whether you are a resident or non-resident.
Due to France’s popularity as an expat destination, foreigners looking to take out a French mortgage 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 specialized expat mortgage services. Read more in our guide to French mortgages.
One thing that can restrict your French mortgage options 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.
Although there were concerns that banks might be reluctant to lend following Britain’s vote to exit the EU, the 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%. 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 some affordable opportunities when compared to some major capitals such as London and New York.
For British buyers, one potential effect of Brexit is that they may face greater restrictions on how much they can borrow, from the typical 80% offered to EU citizens to as low as 50% sometimes limited to non-EU citizens. However, as British buyers make up the biggest percentage of foreign property buyers in France, 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 five 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% 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 (subprime) 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 €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 €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% 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%, although 80% is typical. Non-EU residents and taxpayers may eligible for a mortgage of up to 80%, but this ranges greatly between banks and can be as low as 50% 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.
|Deposit of 20%||€45,000|
|Notary fees (approx. 8%)||€24,000|
|Total cash needed:||€69,000|
The repayments for this mortgage over 25 years at 4% would cost €1,345 per month, plus approximately €80 a month life insurance.
This would mean that you would need to prove an income, after all other debts, of €4,000 per month, or approximately €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 in France tend to work out at around:
- 6% in government taxes (such as stamp duty);
- 1% in notary administration fees;
- approximately 1% 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%) plus the notary costs (approximately 8%).
Euribor and French mortgage 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).
Euribor was brought in because European banks considered that it was necessary to establish a new interbank reference rate within the Economic and Monetary Union.
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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 three-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. As Europe continues to experience historically low-interest rates, today buyers face less risk when locking in a long-term interest rate.
Interest-only (prêt infiné) mortgages
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% interest-only loan and are obliged to place the deposit (minimum of 20%) 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 term. 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% and 150% of the loan amount.
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% and then lend 85% of the 90% valuation, meaning a larger deposit is needed.
The bank will also only take 80% 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% 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.