| Why a French Mortgage?
To finance your French house purchase there are two possibilities
:
1. Taking out another mortgage in the UK using your existing home
as security and paying cash for the new property in France, or
2.
Taking out a loan in France using your new French home as
security.
Many people find it easier to pay cash for their French property
using a second mortgage raised on the UK property, so why take a
French mortgage? Well its also easier to buy a second home in the UK
than buying in France, but this doesn’t mean its better. There are
two reasons to prefer a French mortgage over a UK one :
1. Money is cheaper in France. Interest rates
are generally lower in France than in the UK.
2. To make savings
on the exchange rate. Through the use of immediate or
forward contracts significant savings can be
made.
In this section France Properties explains the
workings of the French mortgage.
How much can I borrow?
This is one of the
first questions you need to ask because the amount you can
borrow is an important parameter in determining what sort
of properties you can afford; it's a waste of time looking at
property that is out of your price range. As a rule of thumb
33% of your net income should cover your existing
financial commitments, your new mortgage and the life assurance
cover.
E.g. a net monthly income of £2000 with a UK mortgage of
£400 and no other outgoings. Taking into account 33% of this income,
that’s to say £660, a borrowing with a monthly repayment of £260
could be considered.
French mortgages can be arranged for acquisition, renovation and
construction of properties.
• Under French law, all mortgages are full status and lenders are
obliged to ensure that a person applying for a mortgage is
financially able to meet the repayments. Proof of income and
outgoings will be required.
• A mortgage of 80% to 85% of the purchase price is normal. Legal
fees will generally be between 6.5% and 10% of the purchase price
The mortgage is secured on the property with the assignment of life
assurance.
Valuation
A valuation of the property is carried out, but not in the same
way as in the UK. The valuation does not include any structural
inspection at all it is only based on whether the property is worth
the purchase price.
Mortgage Term
French mortgages are normally repayment loans, that's to say you
pay capital and interest. Mortgage terms are for between 15 and 20
years or up to the age of 70 (whichever is the earlier). Life
assurance to cover the loan is mandatory and existing life policies
are not generally taken into consideration.
Types of Mortgage
The Fixed Rate Mortgage is
fixed for the whole term, you will know exactly how much you will
have to pay and how many payments to make. There is generally an
early redemption charge payable on fixed rate mortgages. The option
to convert it to a variable rate mortgage at a later date is a
possibility with certain lenders.
The Variable Rate Mortgage
is tied in to the central bank lending rate. Unlike in the UK the
monthly payments usually remain the same when rates change and the
mortgage term will vary. There is generally no early redemption
charge and you will usually be able to convert it to a fixed rate
mortgage at any time.
The Capped Rate Mortgage operates like a variable mortgage but
with a ceiling; in the case that interest rates will rise they will
not, under the provisions of this mortgage go beyond a certain
point.
The Lenders Arrangement Fee
Each lender has a different scale of fees, but they generally
charge 1% of the total mortgage subject, to a minimum and maximum
charge. The fee is not payable until after the offer is
accepted.
Life Assurance and Buildings and Contents
Insurance.
Your notaire will ensure that all the necessary legal
work is complete and that you have been granted a mortgage as well
as having your life assurance and buildings and contents insurance
in force before the deed of sale (Acte Authentique de Vente) is
signed.
The above gives an
overview of the French mortgage system. We at Charente
Property can supply specialist advice and arrange French
mortgages for UK and non-UK clients. Please note French Euro
mortgages are outside most financial advisers’ normal experience and
expertise.
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