In order to obtain a French mortgage under the best conditions, you need to be well-informed and well-accompanied. The French property and finance market is unique, complex and constantly evolving. We have put together an Initial Guide to the main steps to buying in France with a mortgage.
How to get a French mortgage?
A French mortgage is used to partly finance a property, or to refinance an existing French loan. The property must be based in France and this can be either an existing property, a renovation or a future build. The property can be used as a holiday home, a main home or a rental investment.
Typical loan to values range from 85% to 70% of the purchase price – excluding notaire fees and other costs (detailed in our article “The 5 Steps of the Property Purchase Process in France”).
To obtain a French mortgage, you can either use the services for a mortgage broker, or go direct to the bank(s) that lend to non-residents of France. By using a broker, you only need to make one loan application: the mortgage broker will act as a filter between you and the banks and will ensure your application is presented in the most favorable manner – and that time is not wasted applying to banks who do not finance either your type of project or non-residents. Our clients all have very different income streams and are from all over the world – and it is our job to find our clients the best bank for their profile and project. Some banks won’t finance UK-based clients, some won’t finance Chateaux or Gîtes, some won’t finance company directors, or persons based outside the EU. We use our network to advise on the available solutions tailored to each client’s profile.
To apply for a French mortgage, be prepared to be patient and to have to supply a lot of documentation. There is no credit reporting in France so French banks only have a 3 months window on your accounts to decide whether to approve your mortgage application or not. Again your mortgage broker can assist in preparing all those documents.
How much you can borrow will be based on your debt-to-income ratio (taux d’endettement) which typically is limited to 33%. For clients with a high income though, our banking partners can go up to 42%. Your mortgage broker can help go through your figures with you and give you free, no obligation advice on how much you could borrow, how much total deposit will be needed, and what the monthly repayments will be. Please try our mortgage calculators to get an idea of monthly repayments over different durations etc.
You can estimate that the total time, from loan application to completion, will be around 3 months.
All the work done will be to receive your mortgage offer from the French lender, which, once you have received it, will legally require a minimum of 10 days before returning it signed to the bank.
Your notaire will then request the mortgage funds from the bank to be released to them in advance of signing the deed of sale. Completion of the purchase will then take place, once you have also transferred the balance of your deposit to the notaire, who will settle all funds with the seller.
Have a read of our article “The 5 Steps of the Property Purchase Process in France” which goes into detail on the following:
- Searching for a property in France and a French real estate loan
- The signing of the preliminary sales contract for purchase of French property
- The financing request & preparation of the credit file for a French mortgage
- The mortgage offer in France
- The deed of sale & signing preparation for purchase of French property
For all additional information, please do not hesitate to get in touch by completing our contact questionnaire
French mortgage calculators
When thinking of purchasing in France, one of the main concerns is your mortgage capacity.
By planning ahead, you will be better prepared and have fuller understanding of the conditions at this time. To give you an idea of interest rate, please see our best negotiated rates.
In France, the general consensus of our financial partners is that the debt-to-income ratio should not exceed 33%. However, in some cases this can be exceeded.
Taking this into consideration, and to help you evaluate your French mortgage capacity, you will find below three mortgage calculators.
These calculators are based on a repayment (fully amortized) mortgage.
- Mortgage repayment calculator : This will help you work out your monthly repayment by completing the mortgage amount, mortgage term and interest rate.
- Mortgage amount calculator : By inputting your preferred monthly repayment, mortgage term and interest rate, you can determine an overall mortgage amount.
- Mortgage Duration Calculator : To work out the mortgage term, complete the mortgage amount, mortgage term and interest rate.
To have a more detailed simulation with the associated costs, please do not hesitate to contact us to speak with one of our dedicated French mortgage advisors via finance request
What are French mortgage rates ?
In France, there are many different mortgage rates to consider. When looking at the different options available for your project, we would need to take in consideration what your long-term plan would be. For example, is it a rental property, a second home or main residence. Do you wish to renovate or re-mortgage?
Some of the first questions a mortgage broker will ask are based on your personal circumstances. For example, are you employed or self-employed? What is your current income and debt liability ? Based on the answers, we will be able to evaluate your mortgage capacity in France by determining the debt-to-income ratio.
We would also need to take into consideration the mortgage amount you are requesting and how much personal contribution is available. This will also help determine which financial partner is best suited to your project and therefore what mortgage rates they have to offer.
The most common mortgage rate at this time is fixed interest rate for a capital repayment (fully amortized) mortgage. Current interest rates are very low, making it a great opportunity to take advantage of these for a French property purchase. The fixed rate and monthly repayments will stay the same for the duration of your mortgage, meaning that you know the monthly cost in advance for the life of the loan and do not need to worry about the interest rate increasing.
A variable rate is normally based on the Euribor 3 months and can increase or decrease depending on the markets. If there is a change in the interest rate some financial partners will modify the monthly repayment whilst others modify the remaining duration of the mortgage. You can limit the risk of the interest rate increasing by choosing a capped rate. In this instance the rate can increase however it will be limited to 1 or 2% above initial rate. The variable rate is good option if you have the intention of paying off the mortgage in advance, as there are no fees associated with early repayment.
There is the option of Interest Only, however this limited as it is not standard for French banks. It remains an option but with many restrictive accessibility criteria; the rate is also much higher than for repayment mortgages.
If you would like to have more information on current interest rates, please take a look at best mortgage rates.
To help you take an overall look at your project and to advise the best solutions for you, please contact us via finance request.
Types of French mortgages
Many French banks offer mortgages with a variety of conditions. The most popular type of loan tends to be the fixed-rate capital-repayment loan, which is preferable to obtain when interest rates are low, as they are currently. However, depending on your plans including your French property purchase, it would be important to consider all types of French mortgages to determine what might be best for you. A Private Rate advisor would be well-suited to help you with this process.
To finance a French property, there are different types of loans:
- Capital repayment or fully amortized: With this type of loan, monthly payments go toward paying down both the interest and principal amounts due to the bank. As the payments are made regularly, the amount of the loan you owe back to the bank decreases, on both the interest amount associated with the loan and on the principal originally borrowed.
- Fixed rate mortgage: This type of French mortgage has an interest rate that will remain the same over the term of the loan. The advantage of a fixed rate mortgage is that the monthly payments would stay the same until the end of the loan. A fixed rate will of course shelter your loan from rate fluctuations. It is the most frequently chosen type of loan as interest rates have been low as of late It is a great time to take advantage of the low rates and purchase a French property with this sort of financing.
- Variable rate mortgage: A French mortgage with a variable rate can be advisable when the variable rate is much lower than the available fixed rate. When this is the case, you could save a lot of money in interest by choosing this type of mortgage over one with a fixed rate. Variable rate loans allow for additional repayments with no penalty fee; these additional repayments would help to reimburse the totality of the loan more quickly. The precarious aspect of a variable rate loans is that, since the rate is variable, the interest rate that can change over the duration of the loan. Rates can change based on a financial index (such as the Euribor) or other economic considerations.
- Capped Rate Mortgage: This type of mortgage is similar to a variable rate mortgage, with the main difference being that the variable rate has a cap or limit that it will not surpass. The interest rate on this type of mortgage can fluctuate but not beyond the cap, which can generally be an additional 1% to 2% . This means that your payments cannot increase beyond that set limit on the interest rate, so you’d know that your payments would never go beyond the capped amount.
- Interest Only Mortgage: With this type of mortgage, you’d only pay the interest on the loan with monthly payments that would not go towards the capital borrowed. The interest rate on this type of mortgage can be fixed or variable; in either case, payments would go only towards the interest on the mortgage for the duration of the loan. At the end of the term of the loan, the entire amount of capital borrowed would be repaid to the bank. Interest Only mortgages can be difficult to access because of the capital risk the bank would take, so conditions to obtain this type of loan can be more stringent.
Whatever type of loan you are considering, your Private Rate advisor would be available to assist you with your best options and can be contacted here.
Guarantees for French mortgage
Considering the variety of loans offered by French banks, these lenders can, in return, request guarantees. In many cases, the bank may want to have the property that you are purchasing as collateral for the loan. It may be a lender’s privilege (“PPD” or “Privilège du Prêteur de Deniers”), a mortgage (“hypothèque”), or both.
The lenders privilege (Privilège du Prêteur de Deniers or PPD) and the conventional mortgage in France
The lender’s privilege is, along with the conventional mortgage and the bank guarantee, one of the guarantees that a lender can ask for to grant you a mortgage.
This privilege allows the lender to take precedence over other guarantees taken on the property: if your French home must be seized and sold, the lender holding the privilege can be compensated in priority. This privilege can only be used when the loan is used to pay the purchase price of an existing home (old or new). It cannot be used to guarantee the part of a loan that would finance construction of the home. The PPD can cost less than a conventional mortgage.
The difference between the PPD and the conventional mortgage is that the PPD only applies to credits granted on completed buildings (old or new). On the other hand, for the yet-to-be-built part of your financed property, the guarantee would be a conventional mortgage. In any case, a PPD would surpass other mortgage guarantees on the property.
The Guarantor and the French loan
There are also joint and individual guarantees, either in the form of a legal entity, or it can be a friend or relative, who would guarantee that the loan would be reimbursed. This entity or person would be called the guarantor. The bank would review the situation of the guarantor to asses that they are have the financial resources to pay the purchaser’s loan on the property and other debts.
Duration of the guarantee on a French loan
In France, guarantees last the length of the loan plus one additional year. The guarantee expires one year after the final payment on the loan.
If you sell your property during the term of the loan, the mortgage is released by the bank, as indicated by the notaire in a document they issue, releasing the mortgage.
French mortgage insurance
If you are taking a mortgage on your property with a French bank, they will generally require that you have accompanying mortgage insurance. This insurance policy would be separate from any existing life insurance policies.
Types and cost of French mortgage insurance (DC, PTIA, IPT)
For non-resident borrowers, the mortgage insurance policy would cover you in case of death (DC), of permanent disability (PTIA) and of temporary disability (IPT).
The insurance adds a cost to the loan that is determined by the insurance company along a range of factors including age and health status. The minimum cost added is be 0,30% of the loan.
The cost of the insurance can increase considerably if the borrower is advanced in age and if the borrower has serious health issues. Sometimes an insurance company will refuse coverage, but it is more likely in the cases above that the borrower would find the cost of the insurance prohibitive.
The mortgage insurance process
The insurance process begins with the borrower completing a simplified health questionnaire, and may require a doctor’s visit and medical tests.
The bank may request that you take the policy offered by them, or they may allow a delegation of insurance, so that you may review other insurer’s offers to get a competitive insurance rate.
In the case of delegation of insurance, it is important to have the bank verify the conditions of the insurance policy, to confirm that the conditions of the policy are acceptable to them.
On repayment or fully-amortized loans, a portion of the interest is paid along with the capital repayment amount each month. Generally, over the duration of a repayment loan that has a fixed amount due each month, the interest portion of the monthly payment will gradually decrease as the amount of the capital due each month would increase.
On interest-only loans, the monthly payment to the lender would only be for the interest on the loan, and this for the duration of the financing, with reimbursement of the capital borrowed due at the end of the term.
French mortgage borrowers
Private Rate clients are unique and international, contacting us from across the globe with one desire in common: to finance their French property.
We accompany different profiles of borrowers who each have their particular financing. Among the many types of clients that contact us are French expats living all around the world as well as those originally from those foreign countries. Most of our clients are non-residents of France while some are French residents. Many are overseas buyers with whom we communicate effectively long-distance through technology (phone, email) to get their French financing.
A variety of solutions for a variety of clients
We propose financing to a wide range of international buyers, and more particularly to UK residents, US residents, EU residents, residents of the Middle East, Asia, Russia…
With a keen desire to develop more solutions, we study each request on a case by case basis. We consider every financing request for potential success. We work transparently with our clients and lenders. We encourage exchange so that you the client fully understand the process, which can be challenging to comprehend when coming from another country and business culture.
The projects to finance with a french home loan
Lenders like to know why you are purchasing a property and why you are requesting a loan for the purchase. Banks will distinguish between projects for acquisition of a main residence, of a second home, of a rental property and financing of renovations.
- Main Residence: Purchase for a main residence in France is the most reassuring request for a French bank, because as the main resident you are more apt to repay the loan, even if you are a non-resident applying to finance your French property to become a French resident. As a non-resident applicant, the minimum down payment on the purchase of a main residence (15%-20%) would remain higher than for a resident applicant (10%).
- Second home: With France’s low interest rates and loan terms lasting up to 25 years, owning a second home in France has never been more affordable. Monthly payments can be low, depending on the length of the term and the type of financing obtained (interest only vs repayment).
- Buy to Let / Rental Property: With France being one of the world’s most visited places, people want to own a French property to use as pied-a-terre but they are not in France full-time.Others have put it on the lucrative French rental market. Banks will consider rental income in their consideration of the risk of your loan,
- Renovation: You’ve found a fixer upper in France and would like to finance the renovations, or you have some improvements to make to your existing French property. It is possible to get a loan for these works, depending on the initial quality of the property and its potential future value post-renovation. Pricing quotes for the works from construction professionals would need to be submitted to the bank along with your financing request.
- Remortgage, refinance (repurchase of credit) : If you decide you’d like to refinance your French property, the property will first need an evaluation. A property agent evaluation is a start, but the banks would require a professional property evaluator to review your property for its current value. This figure would be the basis for the loan. Fees would be incurred in a refinance of a mortgage, so you must evaluate also if this process is advantageous for you. These fees may include a prepayment penalty on your current loan. There would also be a notary fee, and bank and broker fees.
Getting a French mortgage with a Private Rate advisor
Private Rate mortgage advisors are here to help you evaluate your loan capacity and find the most appropriate mortgage for your project.
All our advisors are at minimum bilingual, so we speak the same language as you and can help you navigate the French banking process. If you have no or little understanding of French, it can be very difficult to understand the process and the requests from the Notaire and financial partners. We are here to guide and advise you from the moment your offer on a property is accepted to completion, via the process of applying for financing and the release of funds for successful conclusion of your purchase.
As brokers, we have an overall view of the banking options available to your personal project. We can help you avoid losing time, applying to banks who do not accept non-resident clients or the type of property you are buying. All our banking partners accept non-French documents and have the capacity to analyze non-French tax returns, payslips etc. Depending on the language, there may be a request to translate into English or French.
We are here to help you accomplish your dream, be it a rental property, holiday home or main home in France. To do this, please complete our finance request.
If you would like to know more, read about your French mortgage broker.