In mid-2015 we ticked the biggest item off the list of our big goals – buying a house in London. In late 2015 we started planning for the next big one – buying a house in the countryside, preferably in France.
We reached out to our mortgage brokers to see if they could help us understand the necessary requirements and financing options available to us. Here’s a summary of what they told us:
Is it easy to obtain a mortgage in France compared to the UK?
International mortgages are not as simple as domestic UK mortgages. Lenders usually want to see a lot of documentation
- Bank statements
- Lots of identication
Our broker uses BNP Paribas – which he said was fantastic to deal with and the 3rd biggest bank in France.
What loan to value ratios do French banks allow?
For purchases in France it’s feasible to obtain an 85% loan to value ratio but this is on a case by case basis. This differs from the UK because the underwriting process here tends to be more human and less ‘computer says no’ which can be beneficial.
What are the interest rates like in France (advice given Sep 2015)
There are different rates out there from variable rates to 2, 7 or even 10 year fixed rates however there is not much variety in product options. On the other hand the rates are quite good – at the time the 2 year fixed rate was at 3.05%.
Rates in France are linked to 3M Euribor. This means the 3 month Euribor, whose interest rate is the rate at which a selection of European banks lend one another funds denominated in euros whereby the loans have a maturity of 3 months.
Can we use rental income from another property to finance the purchase or obtain a loan?
French banks will lend on the basis of a second home, and they understand that you will potentially rent the property out but this is not taken into account as income. The lender will base their lending on an affordability basis and take your income vs your total worldwide debt. This also means that you can not use a second property or equity therein as capital in the purchase of a French property.
What are the fees involved in purchasing a property in France?
For purchasers, the fees incurred in a property purchase look like this:
- Mortgage fee – 1% of the mortgage amount, with a minimum of €750 and a maximum of €1,500.
- This can be paid with the first mortgage repayment or spread over 24 months. This is the bank’s arrangement fee.
- Life insurance (death cover) is compulsory, and can be arranged in the UK
- Mortgage registration – a fee for registering the mortgage on the property: from 1% to 3% of the mortgage amount.
- Notary fees – from 6% to 8% of the purchase price. This seems to include the conveyancing costs as well as stamp duty. There’s a good link on it here.
- Agency fees – normally paid by the seller
How long does the mortgage approval process generally take in France?
Initial approval or the “decision in principle” as we would call it in the UK takes about 3 days. The actual full mortgage application can take six to eight weeks depending on how long it takes to get the lender all the information. If you refer to the above, French lenders usually want to see a lot of documents so this can take some time.
What is a notary? And what is their role?
A Notaire is the French equivalent of the solicitor in England, all financial transactions are done through the Notaire, like a conveyancer in the UK.
Any other financial requirements for purchasing a French property?
It will be necessary to open a French bank account, this can be with any French bank in France. Notary services would normally be able to assist with this.