Totally Property Group Financial Advice - What Mortgage can I get?
Finding a mortgage in France to suit your needs is a fairly straightforward process. Mortgage lenders such as HBSC, UCB (formerly Abbey National) and Barclays, plus a host of other French banks, offer flexible loans of up to 85% of the property value, often for up to 25 or 30 years. In addition, banks in France can often lend for renovation work on the property.
We also have links with mortgage brokers who can advise and help in the selection of banks and mortgages and offer a ‘hand holding’ service through the process.
The European wide Spectrum IFA Group is financial services company who have assisted many Totally Property Group clients over the last 5 years.
Please read on to find out what you need to provide to get a mortgage, plus a few facts and figures about borrowing to buy in France. TotallyLanguedoc and TotallyRiviera have a comprehensive list of mortgage lenders and mortgage information on our useful links page.French Mortgages – the facts Should I take advice? What paperwork is required?
French Mortgages – the facts - How much can I borrow and in what way?EU residents may be able to borrow up to 85% of the property purchase value, depending on their nationality. Non EU residents may only be able to borrow up to 75%. The loans can be for up to 30 years, depending on age and bank chosen. As the buyer you need to fund the deposit (minimum 15%) plus the notary costs (approximately 8%). The notary fees tend to work out as: 6.3% in government taxes (like stamp duty)Plus 1% in notary administration fees Plus approximately 1% of the mortgage amount assignment fee if you are taking a mortgage to assign the bank’s legal interest in the property.
Interest only mortgagesHugely popular in the UK and US, interest only deals are becoming more available in France if you want to reduce the monthly repayment to a minimum. There are however differences with the products in other countries:
Assurance vie Linked (In Finé): With this loan instead of placing your deposit into the property you take a 100% Interest Only loan and are obliged to place the deposit (minimum of 20%) into a French investment scheme which runs along side the mortgage. These schemes can have significant inheritance planning advantages and can offer flexibility if you are going to buy and sell a lot of properties as they can be kept as the deposit for the next purchase. We can give you the details of a qualified and regulated ‘courtier d’assurance’ in France who can assist with the mortgage and broker these for you should you wish to discuss this option.
Dual Phase: Some banks also offer a product which is Interest Only for 5 or 10 years and then becomes a repayment loan for 10 to 25years. This is particularly useful if you believe you will pay off large sums in the first period.
Asset Backed: One bank now offers an 80% Interest Only product which does not require a deposit into an investment scheme and does not have a second repayment phase. You simply need to provide evidence of your other net assets up to a value of between 120% and 150% of the loan amount. This is a very good and popular product especially to those who own other properties. These products are now available with fixed rate periods or 3months, 1 year, 2 years, 5 years or 10 years.
Buy to let mortgages: Many people ask if they can buy on a buy to let basis, and the short answer is no. Future rent can be taken into account but the bank will normally devalue the property by 10% and then lend 85% of the 90% valuation, meaning a larger deposit is needed. The bank will also only take 80% of possible ‘long term, unfurnished’ rental income into account, which is considerably less than what you will probably achieve through seasonal weekly lettings.
Affordability – the ‘debt ratio’The single most important element in successfully getting a mortgage in France is INCOME.There are no ‘self certification’ loans and there are no non-doc (“sub prime”) loans in France. You need to prove that you are receiving a regular income and that it covers all of your debts three times over. These strict Banque de France lending laws state that you are allowed to be up to 1/3 ‘in debt’. So if you earn €3,000 per month as a salary then your mortgages (including the new one), credit cards, loans and other debt repayments cannot come to more than €1,000 per month.
EXAMPLE
Purchase price €300 000
Minimum deposit of 15% €45 000
Notary fees (approx 8%) €24 000
Total cash needed €69 000
Mortgage €255 000
The repayment mortgage for this over 25 years at 5% would cost €1490 per month, plus approximately €80pm life insurance. This would mean that you would need to prove an income, after all other debts, of €4500pm or approximately €54,000p.a. Depending upon which bank you approach will depend upon this figure being your Net or Gross figure. The interest only repayments on this loan would be €1060pm.
