Mortgages in France


Mortgages in France - Buying a property in France with mortgage funding.
There are many financial options available for those people who wish to purchase a property in France with mortgage funding:

Products include:
Interest only mortgage – this is generally suitable for those people who have a substantial net worth. It is a mortgage where there is no underlying policy to guarantee the loan – there is a first charge on the property on which the mortgage is taken. You will only be paying interest on the loan monthly, so your current outgoings will be reduced – BUT you must be in a position to repay the totality of the loan at term. The loan to value for this produce is generally 80%, with a payment term of 7 years to 20 years, early repayment is possible.

Interest and repayment loans but with a fixed interest rate on the repayment for 2 or 5 years – this enables you to budget your finances knowing that you have the rate of monthly repayments fixed for a period of 2 or 5 years – after which the loan becomes variable- attention should be paid in the case of an interest rate fluctuation during the term of the fixed rate interest period as this may affect the term of the loan.

Endowment Mortgages – you will pay only the interest portion of the loan to the finance company but will be required to take out a life assurance policy (agreed by your lender) that will support the capital repayment of the finance at term. You will therefore in this instance be paying monthly interest payments to the mortgage company and also payments to support the life assurance policy. You can borrow up to 100% of the value of the property for a term of between 7 and 25 years. You can also reduce the capital of the loan by early lump sum repayments. Be aware that there may be a shortfall of funds at term, depending upon the prevailing financial market.

Bridging loans in France for French property – now offered by many lenders and assists those who need to bridge their finances between the sale of their existing property in France and the purchase of the new property in France, loans will generally be for a minimum of 75,000€ and for a maximum term of 2 years. Careful consideration should be taken before entering into this type of proposition – current market conditions etc – otherwise you may find yourself at term of this loan with 2 properties and 2 loans.

Fixed rate loans – offered at a loan to value ratio normally of 85% – the interest rate is fixed for the term of the loan – caution should be applied as in the case of a fall in interest rates you would not benefit from any savings (as you would in the case of a variable interest loan) as the term of the loan would have already been fixed. The term of this type of loan is in general from 7 to 20 years.

It should be noted that terms and conditions vary between lenders. Currency flunctuations between the euro currency and non euro currencies may cause loans to increase and your property may be at risk should you not make the specified repayments.

Mortgage Procedure:
Choose you lender and ensure that your circumstances are acceptable to their criterion for loans
Find your property, sign the Compromis de Vente this is the contract to purchase prior to signing the Acte de Vente with the Notaire – ensure that you have the clause written into the contract that the purchase is dependent upon you obtaining mortgage finance. You will regardless of this clause have a 7 day cooling off period in which to change your mind about the purchase of the property.

The Notaire – It is mandatory that property purchases / transfers in France are dealt with by a Notaire, an independent public official, whose role is authenticate all deeds and documents and to ensure that the transaction is carried out correctly. When you are at the stage of the Acte de Vente before the Notaire it will generally be 3 months after the signing of the Compromis de Vente. As the purchaser you have the choice of which Notaire to use.

Taxes and Legal Fees (as opposed to agency fees) involved in property purchases vary but as a rough guide budget between 8% and 10% of the value of the purchase price. The legality, is as stated dealt with by the Notaire who will account to you the purchaser after all documents etc have been files and deposited at the various property registers. Please note this can take some time – allow a good 12 months.
The information contained on this web site is merely a guideline and you are advised to seek independent financial advice.