As overseas mortgage markets go, France is probably one of the easiest and most straight-forward in which to get a mortgage as a foreigner. The market is well-regulated and every year thousands of foreign buyers purchase in France without any problems or complications. There are however some things you need to be aware of from the start:
French mortgages: what you need to know
- Loans of up to 85% LTV are available on both repayment and interest only
options (70% for remortgages)
- Fees seem fairly stable and loans above €1m are easily obtained
- Interest rates in the Eurozone are a little higher than in the UK from
- The sum total of all interest payments you have to make on your debts (including your UK mortgage and any other personal loans you have) cannot exceed 35% of your net income.
How much can I borrow?
Our experience has been that, unlike in the UK where banks are currently reluctant to lend, interest only is a dirty word and arrangement fees keep rising, in France the opposite seems to be true. Loans of up to 85% LTV are available on both repayment and interest only options (70% for remortgages), fees seem fairly stable and loans above €1m are simply encouraged!
What are the rates?
Like in the UK, these vary considerably depending on what terms you are eligible for and want. Interest rates in the Eurozone are a little higher than in the UK at the moment (April 2015) but anything from 2.1-3.75% is the norm with fixed and variable rates available. Rest assured though that at Choice Loans we will seek to get the rate most suitable for you.
Are there any income requirements?
French banks have strict affordability criteria which means that, including the mortgage you are applying for, the sum total of all interest payments you have to make on your debts (inculding your UK mortgage and any other personal loans you have) cannot exceed 35% of your net income.
What else do I need to know about French mortgages?
Similar to the UK the duration is up to 30 years and the minimum mortgage size is €50,000. Both repayment and Interest only options are available and French Lenders generally require you take Life insurance with your mortgage but this is relatively inexpensive and will clear your mortgage if you die during the term.
How do negotiations work?
This is similar to the UK. You can enlist the help of an Agent, view properties, discuss with the Agent or the Seller what their properties are, how long the property has been on the market etc. and, if you wish, make an offer just like you would in the UK.
What is the legal process like?
The whole process takes much less time that in the UK and, in theory, if your holiday is long enough you can make and offer and know that the deal is legally binding before you come home! All this happens much earlier in the process than in the UK. Notaire fees and taxes come to 8-10% of the price of a previously owned property, 4-5% for a new one. Watch out too for the French wealth tax of 0.55% charged on net assets (so, net of your mortgage) over €800,000 or 1.8% on assets over €16.79m
How do I get a survey done?
In fact, surveys are not the norm in France and this is one of the biggest differences with the UK. However, if you have a concern about any structural element of the building or just want peace of mind, you can instruct any one of the growing number of English speaking surveyors working in France to have a look. And/or arrange a visit from a local builder to get an estimate of costs. Obviously you should do this before signing any purchase agreement but if time is tight you can ask the Notaire to include a "Clause Suspensive" in the "Compromis de Vente" to ensure a purchase is subject to a satisfactory survey.
It may sound tricky but as many before you will testify, getting a French mortgage isn't actually that hard and when the rewards are as great as owning a place in the Burgundy countryside or a pied-a-terre in Paris, we hope you'll agree it's well worth it
Lastly, to get the best rates on your foreign exchange transactions we strongly recommend you open an account with HiFX. Quite simply, they will provide a far better exchange rate than your bank and they can do one off transactions or allow you to lock in a guaranteed FX rate on mortgage payments for up to one year in advance. To find out more and sign up, visit their website here http://www.hifxonline.co.uk
Overseas Mortgages are not regulated by the Financial Conduct Authority, nor are they protected by the Financial Ombudsman Service or Financial Services Compensation Scheme. They may not be covered by the home regulator of the country concerned either, so you should consider the risks carefully.
Are you looking for Overseas Mortgages?
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What is needed to apply
Applying for a Overseas Mortgage is very easy. Below are listed the things you need in order to apply.
- Eligibility Criteria Clean credit and sufficient income to make repayments is required.
- Documents Required Initially just an application form but in time you will be asked to prove income and ID
- Additional Comments The entire process takes 6-8 weeks depending on the country you are buying in
FAQs for Overseas Mortgages
- What countries can I get a mortgage in?
Almost any. Though the popular destinations for UK residents buying overseas tend to be France, Spain, Italy, Portugal and the USA, mortgages can also be achieved in Turkey, Australia, New Zealand, South Africa, Singapore, Hong Kong and many more.
- How much can I borrow?
This depends on your circumstances but one key factor we look at is your Debt to Income ratio. Ideally the sum total of the repayments you make on all your debts per month plus the proposed payments for the overseas mortgage you want should not exceed 35-40% of your net income. This factor tends to be the biggest constraint on borrowers raising an overseas mortgage.
- How will I manage the language and cultural issues?
We will ensure you have access to English-speaking experts in the country you are intending to buy in.
- Will my UK credit record affect the success of my application?
Yes, it is a key factor in the eligibility criteria.
- How much will it cost to arrange my mortgage?
The fee to help prepare your mortgage varies from country to country but will be made clear to you in advance.
To learn more or to apply for a Overseas Mortgages please either ﬁll in the call back form at the top of this page or call us on 01494 410 125 and we'll walk you through your options at no cost or obligation.