The good news is that obtaining a mortgage in France is possible for
non-residents, has important tax advantages, and--best of all--the interest
rates are currently very low (from as little as 2.95%). There are a wide
variety of banks (both French and foreign-owned) that will provide mortgages to
non-residents.
Going directly to a bank in France as a non-resident can be precarious. Their
goal is to sign up new clients who live and earn revenue in France with whom
they can build a global banking relationship. Unless you fit this description,
they tend not to be interested. Some banks simply don't have the skills and
processes to deal with foreign clients.
Help is at hand for non-residents
Banking is very relationship-based in France, so having the right contact or an
introduction can make a world of difference. Our mortgage consultant, France
Home Finance, has built a portfolio of over 14 lenders--American, British, and
French Banks, who are set up especially to work with you.
The paperwork and requirements to obtain a mortgage are fairly simple. You will
fill out a multi-page application, plus a health questionnaire for the required
life insurance. The French banks do not use a credit bureau, so expect to
provide copies of personal financial papers like your pay-slips (or company
accounts if you work for yourself), taxes, and bank account statements. While
the applications are in English, be prepared for your mortgage offer and all
future correspondence to be in French.
A critical consideration for French banks is your "debt ratio." Your monthly
debt payments--including your new mortgage--cannot be more than one-third of
your monthly regular income. There are various rules to define what a debt is
and what income is. If the apartment you are purchasing will generate rental
income in the future, some banks will take this into account. The bank will not
count income if they believe it will not continue throughout the duration of
the loan. Nor will they count any recent, therefore unproven, or unpredictable
sources of income.
Taking out life insurance
The French do not believe in leaving heirs with debts, therefore every bank in
France will require that you take a life insurance policy specifically for your
mortgage. The policy must be with a French life insurer for the exact amount of
the mortgage and for the entire duration of the mortgage. The bank is the
beneficiary in case something happens to you. Once you repay the mortgage, you
cancel the policy. For any mortgage that terminates after you reach the age of
75, life insurance becomes very expensive. Therefore, it is best to take a
mortgage that finishes by this date. If this is an issue, it is possible to use
private banks that specialize in asset management to obtain a mortgage. If you
have an investment portfolio, you can transfer management of part or the entire
portfolio to them and they will lend you mortgage funds with your portfolio as
collateral. They will often do so without requiring life insurance.
Depending on the amount borrowed, you may be required to have a blood test or,
if borrowing above 310,000 euros, a full medical exam including urine test and
EKG. Every French person who has obtained a mortgage has had to do this and
there are free insurance medical centres throughout France to get you in and
out quickly. It is also possible to do the exams in your own country, however
you will have to pay up front and be reimbursed. Whatever your situation,
France Home Finance can help you determine your best options.
You can obtain financing for up to 25 years at variable or fixed interest
rates. Depending on the location of your property, your financial profile, the
length of the loan, and the amount you put down, your interest rate can be as
low as 2.95%. The high end of the scale is 4.5%.
French banks will finance a maximum of 85% of the value of the property, with
the usual being 70%. Renovations can be included in this amount. It is
important to verify that you have access to funds needed for the down payment.
Count on an additional 5% to 8% of the purchase price for your closing costs,
also called notaire fees. These are government regulated fees and taxes that
must be paid at the act of purchase and cannot be included in your mortgage.
Lastly you may have real estate agent fees of anywhere from 4% to 8% and a bank
application fee of approximately 1% of the loan amount.
You will need to open a French bank account that your mortgage payment can be
debited from. This can be done in person or from a distance if you are not able
to travel to France. It's important to choose a bank that will provide
top-notch service in English and that will agree to execute banking
transactions by telephone, fax, and e-mail instruction.
How to get started
Now that you understand how mortgages work in France, you are ready to begin.
The first step is to determine your eligibility for financing. After that, it
is important to set the budget for your search and understand the terms and
conditions you are likely to obtain for your mortgage. The great properties
sell quickly, so take the time to create your financial strategy before you
start your search.
Our mortgage consultant, France Home Finance, can provide you with a study to
determine your eligibility to borrow in France, the total cash needed for your
purchase, plus an overview of financing options. You will need to complete a
short questionnaire followed by a half-hour telephone consultation. There is no
fee for this service.
Should you decide to use France Home Finance's services, their fee is payable
only when you obtain and accept your mortgage and includes:
-
Access to all the rates and conditions on the market in one stop.
-
Bilingual mortgage experts to help you to create a winning mortgage
application.
-
Representation and defense of your mortgage application with lenders to obtain
the optimal result.
-
Assistance in setting up your French bank account and obtaining the most cost
effective life insurance.
-
Co-ordination of communication between your real estate agent, notaire,
mortgage bank, current account bank, architect, rental management company, and
any other parties involved to ensure that all documents are in place and the
funds are ready to be released for your act of purchase.
-
Explanation of all documentation that you receive in French for as long as you
have your mortgage.
Contact Tahminae Madani (pronounced "Taminay," or simply "Tam"), our dedicated
mortgage advisor, for your free pre-approval study today:
tel. +33 (0)1 44 88 59 44
fax +33 (0)1 44 88 59 41
Tel UK 0871 733 6983
Fax UK 0871 733 6984
e-mail:
info@francehomefinance.com
website:
www.francehomefinance.com