Ultimate 2024 Guide To Getting A Mortgage in France | French Mortgage Guide (2024)

When it comes to overseas mortgage markets, there will always be great and not-so-great times to buy property. And right now in France in 2024, the prevailing conditions offer an extra interesting challenge for British buyers due to Brexit. French Banks have tightened up conditions and in some cases paused lending to buyers based in the UK.

Conditions have not changed that much for expats and citizens of other countries – besides the interestrates– and long-term deals still work in the buyer’s favour.

The Tec 10 index, which ultimately dictates how much the French government pays to borrow money over 10 years in France, fell during the summer 2019 to its lowest ever level of -0.5% and now stands at 2.61% after an increase in 2023. We are expecting the rates to reduce in 2024 (the Euribor 3 months has already shown a reduction in January 2024).

Even though the rates have risen rapidly, they are reaching a level that was considered a normality before the all-time historic low level we witnessed for a couple of years. They are still quite low and more importantly fixed for the whole duration.

France is the most visited country in the world and one of the most popular destinations for retirement. The main reason for this is its varied mix of geography. From warm beaches and effervescent cities in the south, to snowy mountains in the east. Paris in the north and a dramatic mix of landscapes in between.

This means that one person’s reasons for buying in a certain location can be very different from the next.

One of the main ways in which French mortgages differ to those in the UK is that you can fix the rates for very long periods; normally from 15-25 years. This means that with the current low rates, non-resident buyers can secure amazing long-term value through their French mortgage.

To a British buyer used to the UK domestic market and its inclination towards much shorter fixed terms of three or five years, this can seem almost too good to be true. It isn’t! It’s simply the French way, and it is one of the main reasons why buying in France can be so attractive – right now in particular.

Many banks in France tend to work locally or regionally, meaning that a mortgage available in the French Alps is not necessarily available in Normandy.

Prime locations (Paris, French Alps and French Riviera) often offer the best banking products on the market as they are considered less risky for the bank (the market is fast and growing) but it does not mean that other regions are left behind. But it is important to keep in mind that the location will have an effect on the Loan to Value ratio offered by the bank: the risk for the bank is less in Paris than in Auvergne for example should the bank has to repossess the property in case of default of payment.

A simple answer? As with many aspects of life, the French do things differently. Nowhere is this more evident than in the lending sector. Unlike british banks, who tend only to offer fixed terms of 5 years or less, French banks offer long term rates that are fixed for the entire term of the mortgage. The French like this because it means the financial system and property market both benefit from stability and security over the long term.

Both domestic and international buyers can secure low-rate, long-term fixed mortgages over 15-25 years. This means that they know exactly what their mortgage will cost, all the way until the mortgage is paid off. It’s an incredibly appealing prospect that takes a lot of the guesswork out of buying a property, and offers the buyer peace of mind and considerable financial foresight – something equally true for the banks providing these products.

This commitment to long-termism is one of the reasons why the French property market wasn’t affected in the same way that the UK and Spanish markets were during the downturn. It is also why the country remains so attractive to investors – It’s as a stable destination to place money for long-term growth.

If you’re keen to understand where the French are coming from on all this, here’s an explainer (skip ahead to the next section, ‘How much can I borrow for a French mortgage?’ if you’re not so interested in history)…

Since the Nineties, when interest rates were last extremely high, the French mortgage market has been based on long-term mortgage deals which offer a degree of protection for the borrower. It is quite common for a French resident to fix their mortgage payments for 20 years and to see that loan through to the end without ever remortgaging. Non-residents, too, are eager to benefit from these great long-term deals when pursuing French second home mortgages.

Even variable rate deals offer a degree of security: In France a variable rate mortgage often offers the flexibility to increase the term/duration of the mortgage to bring down payments, with some banks also capping any increase in monthly payments to the rate of inflation.

There is a caveat – in order to offer such good deals, the French banks have become hugely averse to risk. Borrowers, therefore, need to be financially stable. Only in exceptional cases will French banks allow borrowers to take on a mortgage payment which would increase their total monthly commitments past 33% of gross income. By sticking to this formula, it leaves borrowers with sufficient income to live on, and the fact that mortgages are either capped or fixed means that the banks are confident borrowers will not default.

The stability that this responsible lending brings means that 85% loan-to-value is still achievable from a range of banks for both residents of France and European non-residents, though other lending criteria may apply (such as making loans only available to existing homeowners or those with a certain level of savings, with minimum income criteria also prevalent).

Here’s how the mortgage deal works in simple terms: The bank will take a charge (basically a guarantee) on the prospective property – the details of which will be outlined in the loan offer. The loan will generally be what’s known as a recourse loan – meaning that in case of default the bank will take the property as security. In the case of negative equity through a forced sale, there is the possibility that the French bank may pursue the borrower’s assets in their home country. The process of forcing a sale in France can take over two years and is time-consuming and expensive for the lender – it’s one of the main reasons that the banks are so strict when asking for evidence of income and assets.

Next up: the question that everyone always wants to know: how much you can actually borrow if you’re taking out a mortgage in France.

Even if they have the entire purchase price sitting in a bank, ‘How much can I borrow’ is, understandably, what all savvy buyers and investors want to know. Once you’ve found a dream home in Paris, Cannes or The Dordogne, it’s essential to understand exactly how French banks will look at your finances. We cover the entire process right here…

The best first step is to read this guide and then to speak with a professional French mortgage broker who will ask a few important questions to establish your eligibility with a number of different banks. This isn’t a hard sell: it simply makes sense to do it this way, as it would be heartbreaking to dash off to France to view what looks like your dream property, only to find that the French banks can’t cater to your financial situation.

Each French bank has different underwriting criteria and products, so running your situation past a broker will help you to understand your options. French banks are notorious for saying yes at the beginning of the process only to perform a dramatic U-turn at the last minute, leaving would-be borrowers frustrated as the purchase deadline approaches.

No one wants this, so we aim to reduce the risk of wasting time and money by applying the ever-evolving banks’ criteria in advance to seek out the most appropriate offers, based on our experience of the current market conditions. As brokers we do not carry out UK credit checks, but can give a decision in principle. French banks will carry out a credit check once they receive your French mortgage application form.

As a general rule of thumb, you can borrow 5 times your individual or combined (spouses/ partners) income for a repayment mortgage in France, less the value of your existing mortgage balances (ie, outstanding debts on other properties).

With interest only mortgages you can borrow 10 times your income, less outstanding mortgage balances. There is, of course, a catch: to obtain an interest only mortgage in France you must have net assets outside of your main residence which at least equal the value of the mortgage. If you want to borrow a million Euros through an interest-only mortgage, then, you need to have at least that amount stashed away somewhere.

This is only a rule of thumb, and each buyer’s application is looked at individually to see what they could potentially afford to borrow. Different banks see things differently – there are variations on how they might view your mortgage payments, for example, or how income is considered. It’s not a lottery, exactly, but there are lots of variables, so before getting hooked on a specific property, it is worth contacting us for a quick consultation.

A client’s debt-to-income ratio is one of the key factors that a bank will take into consideration when considering an application – it’s one of the things that can derail the property dreams of even the wealthiest clients. What the banks are looking to see is if your existing monthly payments for loans and mortgages exceeds one third of your gross monthly income. It’s not a complex calculation – you simply divide your outgoings for debt payments by your gross salaried income (or net profit from self-employed income).

For example, if you earn the equivalent of €3,000 per month, a French bank will not allow your total payments for your existing borrowings and the future mortgage to exceed €1,000 per month for a second home – €1,000 being 33% of your gross monthly income.

Some helpful calculations

• For a repayment mortgage over 20 years, for every 100,000€ borrowed, it currently costs around 600 € a month.
• For an interest only mortgage, for every 100,000€ borrowed, it currently costs around 333 € a month

How is rental income from other properties factored into the debt ratio in France?

French banks do, of course, take rental income from existing properties that you own into consideration when working out how much to lend: they permit 70% of the rental income associated with any existing property investments. Sometimes the rental income is deducted from the mortgage payment – which is advantageous to the borrower, though more conservative lenders may simply take existing rental income and add it to the borrower’s main income. The maths here effectively mean that only 25% of the rental income is being taken into consideration when calculating the debt ratio. We appreciate that all this can quickly become rather confusing, so please contact us if you want a more detailed explanation.

Formula: (annual gross income + 70% of rental income) x 33% / 12 – what you pay already in mortgages and loans and rents = what is left for you to spend on the French mortgage.

What is the effect on the debt ratio and conditions if I want to rent my new French property out?

An excellent question – and one that will be important to many buyers. What people often aren’t aware of is that the Anglo-Saxon notion of a buy-to-let where the property is a standalone investment is becoming rather outmoded in the UK. In fact, many Anglo-Saxon markets are moving closer to the French model where there is no separation between the investment and the borrower’s personal income situation.

The positive to be gleaned from this is that all French mortgages work both for second homes and rental properties– the banks see no difference between a property you want to holiday in or buy specifically to rent out.

The downside is that in most cases the rental income from your new property purchase in France will not be taken into consideration. “This means that banks will need to look at a client’s complete financial situation before deciding whether to lend. Projected rental income from the newly-purchased property is simply not considered – the banks are highly averse to risk and take the view that a multitude of things could get in the way of your anticipated rental income. So it is entirely removed from the equation.

We have had many calls from people wishing to purchase a commercial property in France. Especially popular are gites and fishing lakes. Sadly, these types of properties are not financeable by the average, everyday French bank as they are considered to be commercial activity and, therefore, require a professional loan for businesses. The only exceptions to this are if the plan is toconvert the property – or it is not apparent that the property is commercial.

All is not lost, however: we have good contacts with a number of respected private banks whose expertise in lending against commercial properties means they can help. However, with private banks, the value of the properties needs to be around 2M€ and above.

Income which can be considered for the purposes of French banks are as follows.It is best if everything is clearly evidenced on a tax return.

• Salaried income
• Dividends with a three-year track record
• Other regular income from investments
• Income from partnerships
• Pension income
• Rental income with tenancy agreement (from existing property purchases – not your intended new French home)

There is no definitive list, but these will typically include payments for loans, personal loans, car loans, credit cards (unless cleared each month), mortgages, alimony, hire purchase, insurance policies, rent.

For some odd reason, French banks do not take school fees into consideration for the debt ratio. So if you have two children at Eton, the not insubstantial term fees will not be assessed in your outgoings!

As a broker, we do not carry out any credit checks. One or two French banks may run an Experian check on borrowers once they receive a signed application form, however in most cases there is no credit check in France. Instead, they run a forensic check on applicants’ income via tax returns, pay slips, bank statements, employers’ letters, rental agreements and mortgage statements etc.

As a broker, we do not carry out any credit checks.

With most French banks, things are done by the book – there is little room for discourse as all they want to see are the correct documents that help them to pass the application up through the approval process. They are interested only in the status of you and your finances, so we often call this ‘status-only lending’, which differs from private banks who can take more of a holistic view when assessing your needs. If the purchase is over €1M, then the flexibility of a private bank which lends for property purchases in France may be an attractive option.

If you already know that private banking is the route you want to go down, please jump forward to our private banking section, later in this guide.

The typical, classic French mortgage from the ’80s would have been a 15-year repayment mortgage up to 70% of the purchase price. Nowadays, a 20-year term is more common, though French banks are willing to provide a loan of 100% of the purchase price with the proviso that instead of paying the 30% into the property, the money is placed in a savings account with the French bank. This nudges things towards the domain of private banking, and our clients often use this method to access even lower interest rates.

The way the savings are managed varies from bank to bank. We recommend using a financial advisor in your home jurisdiction to help with decisions on how to invest this money.

If you don’t want to go down this route and want a more traditional mortgage with a deposit, banks have lowered their requirements since the 1980s and will now often lend up to 85% of the property price.

The monthly repayment amount of your French mortgage (or any of your existing mortgages) is a key consideration for French banks and will influence how they will lend.

The two main factors here are the duration of the mortgage and whether or not the loan is on a repayment basis. The shorter the duration, the higher the cost. The lowest cost will be if you take a mortgage on a part interest-only or full interest-only basis. Interest-only mortgages in France are few and far between and usually require a savings account to be opened with the bank.

Below is a table of the rule of thumb cost per 100k borrowed that we use when doing a preliminary French mortgage affordability calculation

Cost per month per 100k borrowed

– 10 years repayment product 995 per month

– 15 years repayment product 730 per month

– 20 years repayment product 600 per month

– 25 year repayment product 530 per month

– Interest-only mortgage product 333 per month

Of course, these costs fluctuate given the rate environment and also if we have to factor in payments that are included in the mortgage towards a life assurance contract. However, this is a good rule of thumb table as it generally varies very little and is close enough for estimation purposes.

French banks – whose customers are, naturally, mostly French residents – usually steer their clients towards repayment mortgages for properties which are intended as the buyer’s main residence. Interest-only options (when available) tend to be reserved for investment properties. Unlike the UK, where main residences are considered as assets, in France, they are viewed more as ‘a place to live’. Because of this, banks see a repayment mortgage on the main residence as a way to make sure that the debt will be repaid over time by the customer (so long as they keep up with the monthly payments) in order to keep the property they live in. With an interest only mortgage, the capital has to be paid at the end – which represents more risk. In the eyes of the French banks, if you want to speculate, do it with a property you don’t live in.

Given that the French property market is more of a long-term hold due to a history of stable property price growth since 2000 and the availability of 20-year fixed-rate mortgages on a repayment basis, many people opt for a repayment mortgage over an interest-only one. Of course, there is a market for interest-only mortgages, especially for those expecting a windfall in the near future where the funds to pay off the mortgage will become available.

A repayment mortgage has the certainty of being paid off at the end of the term, whereas an interest-only mortgage still has the full balance left to pay at the end of the term. One important point: interest-only mortgages are notoriously difficult to refinance in France – unless a private banking solution is sought. If in doubt, experience has taught us to recommend that people take a repayment mortgage.

Some banks look at the assets a client holds before deciding to offer a loan, and many of them apply a net asset criteria in order for clients to access certain LTV rates and products. A good example of this is an interest-only loan, for which some banks may ask to see a net asset position of 120% of the loan amount.

In other words, if you want to borrow €100,000 against a property priced at €100,000 on an interest-only basis, you would need to have €120,000 in net assets.

Net assets are found by taking existing asset values such as property owned, share or bond portfolios and money in non-pension savings accounts and deducting all outstanding loan amounts. If the eventual amount is more than 120% of the loan amount desired, the French bank should have no problem making the loan – though income criteria still apply.

Other banks, however, may require you to be an existing homeowner before lending to you, or that you hold 30% of the purchase price in cash before accepting you as a client.

In any case, you need to have enough savings to support the deposit and the fees – and to prove that you have enough savings left after the purchase for the rainy days.

A quick comment here on the attitude of French banks. While it would be wrong to lump them all together, though there are definitely some patterns. Whether we are dealing with a national company or a single small branch banker, they will be extremely fastidious. It is unusual to be able to skip any part of the process or to substitute any of the documents they require for another.

Their attitude overall is that they have enough clients willing to snap up the ‘vanilla’ offering they have (people who neatly tick all the requisite boxes) – so why waste time on anything non-standard?

By contrast, a broker will have some experience in presenting applications to the lender in ways which perhaps push the envelope a little – but will still be acceptable to them. Because of this, our recommendation for applications in France and elsewhere is… always use a broker!

Each bank will have an ‘age ceiling’ which will affect the amount you can borrow. The maximum age we are aware of permits loans to be completed at the age of 85, though the vast majority must finish at 75.

The effect of this can be that, for certain lenders, the duration of the loan may have to be shorter than they would have liked – and the mortgage payments would go up accordingly. This has further repercussions: in many cases, the maximum amount that the banks will lend you will end up being reduced – because they will still insist that you comply with their previously-mentioned debt-to-income criteria.

Often, banks will also want to take a very close look at a client’s income situation if they are likely to enter retirement during the loan term. This can mean that either the retirement situation is documented clearly, or a “haircut” of 40% may be given to the current income situation (i.e. they will knock an arbitrary 40% off your current earnings situation for those years when you will be in retirement). This will also affect the eventual debt ratio.

When considering joint applications, it is the age of the older borrower that will be used when deciding what the maximum duration would be. The only exception is when the income from the older borrower is not being taken into consideration (i.e. it is solely the income of the younger borrower that is being used in the mortgage calculations). Age is also a consideration when setting the amount which will usually have to be paid for life assurance to cover the loan in France. More on this (very important point) later.

This is something that all new clients naturally want to know. Knowing the broker fees can help give you an idea of how much to budget when considering the overall costs, and it can equally give you an expectation of what, exactly, your broker is bringing to the party.

Experienced property investors want to know broker fees, too, but for slightly different reasons. Experience has usually convinced them of the value of using a broker – they’re typically more interested in the precise rate their broker will charge.

You can read more about our terms of business here in our service disclosure document, but to cut straight to the point our service as brokers is usually remunerated at around 1% of the loan amount. This takes into account the value we add in terms of the network of contacts we have created over the years, as well as the costs of maintaining that network.

We will usually save our clients money over the course of the loan via accessing lower rates than they would get if pursuing a mortgage themselves, and also help make the experience of getting the mortgage as stress-free as possible. This is a considerable plus for many clients given the difficulties of working across cultures and borders.

In some cases it is the bank that will pay this fee to us, which makes our service free to use for our clients. In other cases the fees are charged to the client directly.

In all cases, a full range of options will be presented to you with all fees and taxes clearly explained so that there are no budgeting surprises.

The affordability calculation does not change for equity release or refinance mortgages in France. One point to note is that it is very difficult to release equity from properties in France unless you enter the realms of private banking.

For refinance loans, there is a curious situation in France that the banks do not really like to extend the duration of the loan by much – they will typically only stretch to an additional 25% or so at the most. So if, for example, a loan with a 20-year initial rate has 10 years left, it is unlikely that the French bank will want to extend the term to much more than 12.5 years.

This means that when refinancing, the actual monthly cost would not decrease as much as one would expect – simply because the duration cannot be extended by much. In addition, the costs to refinance – including the mortgage registration tax and any early repayment charges – are usually in the region of 3-5%, meaning that the new rate you are securing needs to be at least 0.5% lower than your existing rate for this to be even remotely appealing.

The best course of action in nearly all cases is to get a French mortgage and then hold it until the end of the term, by which time it should be paid off without any complications.

Next up: a step-by-step look at everything you need to go through in order to secure a property and mortgage in France. It can be a long and rigorous process, but it’s far easier when you have an expert to guide you through it.

You now hopefully have a much clearer idea of how French banks will look at your finances when deciding whether to offer you a mortgage – but how do you actually go about making an offer, applying for the loan and sealing the deal? We cover all the next steps right here…

The process of getting a mortgage in France should start with a deep breath, as there will certainly be some practices and customs of the French banks that you will not be prepared for. Even with decades of experience between the members of the FPF team we are still occasionally stumped by seemingly nonsensical requests from lenders.

We highly recommend beginning the process as early as you possibly can, speaking with a broker and completing an application form so that a plan can be made to optimise all aspects of the mortgage. You can find an example of the application form here or, if you’re still not clear on how much you might be able to borrow, you can read the section on how to calculate your affordability for a French mortgage here.

It is advisable to check your affordability as early as possible, as this will help you target the right properties– there’s no point in falling for a property that you feel you can afford if the amount you would need to borrow would flatly be refused by a French bank. An awareness of your affordability also means that we can find the right bank for you as quickly as we can.

If you meet a bank’s affordability criteria and are generally interested in one of its mortgages (everything is non-binding at this stage), we can help you through a decision in principle. This is pretty painless – there are just a few forms to fill in and if the bank is happy that the figures all tally, they will usually offer a mortgage in principle.

You can expect to get an answer back from the bank in as little as one or two days.

While knowing that a bank will lend to you (at least in theory) is clearly an important first step, it is worth remembering that is just a tiny part of the overall process.

Underwriting criteria:

Each of the French banks has slightly different underwriting criteria and so requires a slightly different set of supporting documents. Some banks may also require documents to be certified by a finance or legal professional.

The banks will require a full set of documents to process a mortgage application. We’ve listed everything you’ll need here and we advise you to make a start on gathering them as soon as possible.

This is a fairly complex question that may end up being the one that eats up most of your time when researching how to buy. For some buyers, it is absolutely worth considering at the outset if you will hold the property in your own name or purchase via a company structure. French banks will lend to Societe Cilvile Immobilieres (SCIs) and SARLs (two types of French companies) if they are comprised of close family members (parents/children buying together, siblings too – but not cousins or friends). A discussion of relevant tax implications can be found in the French tax section.

However, French banks do not lend to UK companies – nor can a UK company be a shareholder for an SARL de Famille, according to our research.

Please remember that the above information is for informational purposesas a kind of ‘jumping-off’ point for discussions with qualified professionals and should not be relied on without a full appreciation of your personal plan and circ*mstances. Phew!

The documents required to support a French mortgage application are as follows:

Identity Details

– Certified copy of a passport for each borrower

– 2nd proof of ID (ideally birth certificate, or, alternatively, a driving licence) for each borrower

– Copy of marriage / divorce certificate

– Utility bill less than 2 months old (electricity, gas, water) – council tax is not allowed by French banks

Employment Details

If employed

– Headed letter of the employer specifying professional status, length of service, gross annual income and bonuses for the last 3 years

– Last 3 months’ payslips

– Last 3 years’ P60s and tax returns

If self-employed

– Last 3 years of the company accounts (with profit and loss)

– Last 3 years’ tax returns

– An accountant’s letter breaking down your income for the past three years. This should include salary, dividends and any other income. For the company, it would be good to have, in the same letter, confirmation of the last three years’ turnover and net profit/loss. If the accountant could add a word on the financial stability of the company and its ability to continue to support your income from its activity, that would be helpful.

If Societe Civile Immobiliere

– KBIS extract less than 3 months old

– Status of the SCI or project of the status if the SCI is being put in place

– Last 3 months’ bank statements

– RIB / IBAN (account details)

Financial Details

– Last 3 months’ bank statement of all current accounts

– Last 3 months’ bank statement of all savings accounts

– Copy of the most recent loan statement or the original offer

– Last 3 months’ statements of your credit card bill

– Email explaining large and regular transactions

Property Details

Applicant’s Main Property

– Tenancy agreement signed

– Title deed from land registry and copy of the most recent mortgage statement or the original mortgage offer

Other investments property(ies)

– Title deed from land registry and copy of the most recent mortgage statement or the original mortgage offer

– Tenancy agreement signed if rented out, any recent documents proving your rental income such as lease contract if no tenancy agreement

Property to finance

– Contact details of someone at the property for its valuation by the bank

– Copy of compromis de vente (contract of sale) signed by both parties

– Copy of reservation contract signed by both parties

Situational

– Quotes from builders for any proposed works by the new buyer

– Marches de travaux (works contracts)

– Assurances decenale for each builder (a guarantee on any work done on the property)

– Architect contract (for major building works)

French mortgage products

French mortgage products are designed to maximize security to the borrower, because this is what the market wants. Therefore the majority of loansin the French mortgage market will be on a long-term fixed rate or a capped rate. The range of products is not quite so dizzying as it is in the UK, which can be great on the one hand (easier to fathom plus some excellent long-term deals) and annoying on the other (limited choice).

Repayment mortgages

When compared to interest-only mortgages, Repayment mortgages are generally more expensive as you have to pay the interest on the loan amount and also pay off a portion of the capital each month. Of course, with French mortgage rates so low at the moment, the long-term value can be substantial, especially when compared to rates of other European countries. Repayment mortgages are often called ‘capital and interest’ mortgages and the payment for €100,000 may be, say, €7,200 per year – almost double the cost of an interest-only mortgage. Repayment mortgages are best used for main residences or for investments, such as leasebacks, where the aim is to pay the mortgage off and/or enjoy the income. Repayment mortgages (prêt amortissables) are the most common mortgages in France and offer the most protection.

Interest-only mortgages in France

With an interest-only mortgage (prêt in Fine), as the name suggests you only pay the interest on the amount you borrow. If you borrow €100,000 at a 2.5% interest rate you will have to pay €2500 per year. After 20 years you will still owe the €100,000 and have to sell the property or find funds from elsewhere to pay back the money you have borrowed. Hopefully, the property you bought will have appreciated in the meantime so you will have made a profit whilst keeping your costs down.

Interest only-mortgages are the mortgage of choice for investors looking to make a return by selling the property for more than the purchase price.

A word about security

Most borrowers (and all lenders!) want security in their financial plans, which is why the long-term fixed rate is our top product. It offers low rates for a long time, safe from market risks.

Some clients, however, prefer a variable rate so that they can avoid early repayment charges – they also tend to consider the risk of rates suddenly increasing to be low. Generally, these borrowers are expecting an income boost in the near future that they will use to repay the loan.

There is an in-between product that offers some security (the rate is capped so the exposure is limited) while benefiting from the advantages of the variable rate: it’s known as the capped variable option.

Fixed rates

The majority of loans in France for French property utilise a fixed rate for the term. Fixed rates are available over 10, 15, 20 and even 25 years. The rate is fixed for the entire duration of the mortgage whichoffers a high level of certainty in terms of the monthly payment. There should be literally no surprises with this kind of mortgage.

Variable rates

The majority of French variable mortgages are capped, meaning there is a maximum rate that the mortgage can reach for a set duration.

The duration of some variable rate tracker loans are ‘elastic’ and can stretch the mortgage term by up to five years if rates increase so that your mortgage payment will remain the same – even if rates increase by as much as 0.75%. In addition, any increases to the mortgage payment are generally limited to the rate of inflation per year, meaning an overall increase to the amount you pay of 2-3% per year. Due to the current fixed rates, French banks are now offering relatively few variable rate options.

Switching to a fixed rate

Further protection is offered by French law so that should you take a variable rate mortgage you will always have the option to call your bank and switch to a fixed rate for the rest of the term. note, however, that if you make this switch, you may have a penalty to pay – and you will not be able to switch back to a variable rate mortgage. These extra features offer peace of mind to the prospective borrower in France but do vary from bank to bank. It is important to get to the bottom of these features when comparing the various offers on the market. Your broker should be adept at digging into and explaining all the nitty gritty.

Good levels of security

Many of the mortgage products offered by the French banks offer peace of mind to borrowers but they really do vary from bank to bank. Prospective buyers should make sure they have a good understanding of what is available as choosing badly can obviously be costly and very hard (if not impossible) to undo.

Once all of the necessary documentation has been received it will be reviewed by an underwriter who will check the affordability and make sure everything is in order. He/she will raise questions and ask for further clarification or paperwork if it is needed.

Once that hurdle is cleared, the underwriter will send the application on to a risk committee and/or compliance committee, depending on the bank. For a large loan, the application may pass through several more committees before approval.

Purchase through a company

If you are buying the property inside a company structure, you will have to provide the name of the company and, perhaps, the draft statutes at this stage. The loan can be approved with just the drafts – but the mortgage offer will not be printed until the formation of the company has been finalised, as is the bank account for the company, which may well require a trip to France. So be prepared!

Once the rate has been agreed and secured, then the requisite French life insurance can be sorted out – as a general rule, if you want to borrow in France you need life insurance (or assurance as it is known in France). The process involves completing a medical questionnaire and possibly undergoing some tests and waiting for the results. Then the rate of the insurance can be added to the mortgage contract.

Eligibility for the insurance

Age is an important consideration when setting life assurance rates in France. Unsurprisingly, Younger applicants will obtain cover with lower monthly payments, whilst older applicants will pay more.

If you have had any medical problems in the past, or you are borrowing a large amount of money, you may find that the French life assurance company will ask you to undertake medical tests.

You may actually be refused life assurance altogether if you have had serious medical problems. However, it may be possible to arrange a loan without life assurance in some cases or to assign UK life assurance cover – by doing this, though, your choice of French mortgage products will be greatly reduced.

Opening a French bank account

Opening a bank account in France is a crucial part of obtaining your French mortgage – because your mortgage payments will normally need to come from a French account. The point at which you have to do this is normally three or four weeks after you’ve started the French mortgage application process and in most cases it is a non-negotiable condition of the loan. The upside, of course, is that once you do have a French bank account, everyday life when you’re in France becomes a lot easier.

Opening the account

The process for opening a bank account in France is fairly quick and easy – though less so when opening a company account (see below). First, you need to fill in and sign the appropriate forms. They will be in French, but we provide English translations of them so that you can see what information they require.

In addition to a completed and signed form, there are also a number of other documents required:

– Copy of valid passport

– Marriage certificate (copy)

– Recent utility bill from your main residence (copy) – less than 3 months old

– Proof of income (tax document, accountant’s letter or last two payslips)

– The reservation contract/title of the property in France

Once these items have been provided, we normally just need 48 hours to open an account.

However, most lenders will want you to open a bank account in their own branch and will require a face to face meeting. Be ready to travel to France for this part!


Joint accounts

These are common in France, and you have the option of the account being held as M. et MME. SMITH or M. ou MME. SMITH (especially if your name is Smith!). The subtle difference may seem small but it is very important: in the former case, both partners must sign a cheque or withdrawal slip in order for it to be valid – also, in the event of one partner dying, the account is frozen until the will has been settled. If you wish to have a joint account where either partner can sign and draw on the account, then you should choose the second option. A quick French lesson: ‘et’ means ‘and’ whilst ‘ou’ means ‘or’; M stands for ‘monsieur’ while MME means ‘madame’.

Banking hours

French bank opening hours are quite variable, depending on the location, size of branch and so on. In general, they are open from 09:00 to 17:00 Mondays to Fridays. Some banks will open on Saturday mornings and late on certain evenings, though this is more likely in larger towns. Lunchtime closing is the norm in smaller towns.

Opening a bank account for a company

The process to open an account for a company is not that straightforward unless the bank providing the loan also opens the account. If we have to use a different bank then it will most likely require a trip to France.

With the French account open (plus the direct debit form for your mortgage payments completed) and the life assurance in place, the bank will be ready to print the offer and to send it to you via DHL, FedEx or similar.

Once you have received the offer you will have to wait 11 days before you can sign and return it. Unfortunately this “délai de réflexion” (thinking time) cannot be waived or avoided. The only exception to this is that some banks will allow you to return the signed form the next day if the mortgage offer is in the name of a company. This varies from bank to bank, some of which argue that as there is a personal guarantee involved from the clients (who are the guarantors of the company), the full 11 days should be waited.

During these 11 days you may use the time to either prepare a trip to France to sign and complete the purchase and transfer your personal funds; alternatively you can arrange for a power of attorney to be completed so that the Notaire (the French legal representative that must be engaged for all property sales) can sign on your behalf.

Power of attorney

Arranging a power of attorney is a simple task, though there is, as always, some paperwork. The Notaire will arrange this “pouvoir” (power) once he/she has a copy of your mortgage offer and send you a copy. This document and the mortgage deed have to be completed in front of a public Notary in the UK and then the document has to be “apostilled” (certified) at the Foreign and Commonwealth office to ensure the validity of the witnessing signatures. There are services that can get this done for you – let us know if you need an introduction.

The minimum time between the bank receiving the offer and transferring the funds to the Notaire so that the purchase can complete is 2 to 3 days. It is not worth planning on less than a week, however, though, just in case there are any delays.

Completion of the purchase takes place in the Notaire’s office – either with you physically present or by the Notaire alone with the requisite power of attorney.

A quick recap: before taking possession of your property, you will likely need to visit France three times – once for the viewing/to make an offer; once to open the bank account; and a third and final visit to sign with the Notaire.

The Notaire will send a breakdown of all the funds which have to be transferred. This will include the “Notaire fees”. This is a catch-all term which breaks down as:

His fees for conveyance of the property will vary and will have to be added.

Mortgage-related fees

By taking out a mortgage in France, you will also have to pay mortgage registration tax which varies depending on the loan amount, but as a rule of thumb will be 1.5% for a new build property and perhaps only 0.75% or less for an existing property using a “PPD – Privilège de Prêteur de Deniers”. This is included in the Notaire’s breakdown.

French banks will charge up to 1% as a fee to set up the loan, though generally the amount will be lower than this and not usually included in the breakdown as this is usually transferred directly by the buyer to the bank.

You will also incur fees with your new French bank account, which will have an annual fee of approximately €100. French Private Finance charges a fee as specialists in securing and adding value to the mortgage process which will be payable on acceptance of your mortgage offer. Usually, the combination of bank and broker fees does not exceed 1% of the mortgage amount.

French banks and French laws are well set up to deal with the purchase of off-plan properties in France by non-residents. Unlike in Spain, it is possible for the transfer of title to take place before the property is built. This makes things easy for the buyer as the mortgage can be arranged in the months prior to exchange. The buyer can also be certain of the loan amount and the conditions of the mortgage long before the signature of the sales deed.

As there will be some sort of construction period during which the property is being built, you can ask for a mortgage repayment deferral period during which, depending on the bank, you will only have to make life insurance payments until the property is completed.

The amount of interest accrued during this deferral period will be calculated pro rata on the sums drawn to cover the staged payments during the construction (once again, if we’re straying into technical details that you’re finding a little too complex, then please feel free to contact us for a chat). This means that you may not have to make full payments for your mortgage until you receive your first rental income payment from the managing agent (if you are buying off-plan to let). Other options for the construction period include paying the interest during construction or starting repayments immediately.

All of the above information about the French mortgage process is applicable to buyers who plan on financing their new property in France with a loan from a common-or-garden French bank. In many cases, this is exactly the right solution, but there is a completely different way of buying in France that opens up a whole new range of options. In the following section, we explore the world of private banking as a way to purchase your property – something that can be especially attractive when the purchase price is one million euros or more…

Not everyone has a clear idea of what a private bank is or does – many people picture a small office in Geneva with security guards outside and a big vault stashed away behind a large steel door. That’s not quite it! Here, we explain what exactly a private bank is, what it does, and why – in some cases – it is an excellent choice when buying a property in France. If this is all new to you, you might need a little extra help (it is a pretty complex area of banking!) – so please don’t hesitate to contact us if anything needs explaining further.

A private bank is an institution focussed on growing the amount of money it manages through concierge-like customer service and investment excellence.

It aims to manage client assets to generate returns and preserve capital. Unlike their retail banking counterparts, private banks do not engage off-the-shelf, high-volume mortgage lending, preferring a more intimate relationship where trust can be established and a holistic view is taken to each client’s financial needs.

Taking this broad view to the financial lives of those who have entrusted a portion of their wealth to them, private bankers may also seek to act as a kind of one-man family office, connecting the client with experts in tax or making other suitable introductions depending on the project at hand.

In short, your private banker is something akin to your personal financial adviser.

They are seeking flexibility

Approximately 50% of French property buyers who use a private bank to arrange finance are taking advantage of the greater flexibility which can be found in terms of the underwriting criteria of the various banks. This ability to take a more bespoke view, as opposed to the ‘one-size-fits-all’ approach of the retail banks, means that mortgages and loans can be obtained for those with even the most complex financial situations – though the bank will need certain assurances that a wider financial relationship with the client can be established.

They are seeking optimisation

Others seek a private bank to optimise their purchase. A private banking arrangement for a property purchase can be looked at as one of the only occasions where you can have your cake, eat it – and get slimmer. Owing to the asset and investment management relationship that the private bank has with its clients, the interest rates on the mortgages they can offer can be very low. Low rates, when combined with not having to place any deposit down for the property and getting 100% finance, means that any existing investments can be left where they are, generating income to help cover the interest on the loan whilst at the same time enabling buyers to enjoy the benefits of property ownership.*

*Note: FPF does not offer advice on investments or make any warrants as to the suitability of each private bank. Our advice is always to keep funds in cash to support the loan. Any investment decision is made between the bank and the client.

Private banks are motivated by the desire to increase the amount of assets they have under their management. As this is one of their main measures of success, they are very interested in speaking with UHNWIs (Ultra-high net-worth individuals: people with investable cash or assets excluding property of more than $30M) and HNWIs who can place large amounts of money under management. Given that the number of people meeting this definition is small, private banks will often begin working with people well before they reach this status, hoping that they can help them get to the next level.

In terms of making a property purchase, one of the first things private banks look at will be the size of the deal (the purchase price and the mortgage that is required), with a particular focus on the assets that the bank will be managing post-deal.

The second element is the ratio between the amount of assets and the loan the client is seeking to take out. Banks across Europe are subject to the Basel 3 capital requirements which lay out in particular the Tier 1 capital ratio (contact us if you’d like us to walk you through all this):

– Core equity capital (cash, investments)

– Risk weighted assets (mortgages, liabilities)

In simple terms, private banks do not want to enter into loans which are going to decrease their ratio, i.e. they do not want to add a mortgage or a liability to their books without taking pledges over financial securities to offset this. This is why something called a Lombard loan (detailed below) is so attractive: the higher the ratio of assets to loan you take, the more flexibility there can be.

There are two main options when establishing a private banking arrangement – though it is possible to find optimal levels by blending the twoin order to create the best value.

Option one: Minimise funds transferred to the bank

The private bank takes the property as collateral and gives a lending value to it.

In this scenario, we seek to find a lender who will lend 100% of the amount required to purchase the property. We then look to see if we can minimise the amount of assets which are required by the bank.

Under normal circ*mstances, the usual minimum is 30% of the loan amount, though this can be reduced to 20% or sometimes lower depending on the specifics of the deal. In general, if the private bank can see that there is strong potential for further development to the asset management side of the relationship, they are more willing to be flexible.

In other words, if you as a new client look like a ‘good bet’ going forwards in terms of your ability to generate wealth for the private bank (by having them manage significant investments for you), they will be more inclined to bend over backwards to find a mortgage arrangement that you find appealing.

Option two: Minimise interest costs

This is a private bank’s favourite type of lending. Here, the loan is fully collateralised with cash assets managed by and pledged to the private bank. In many cases the client would place the property (for tax purposes) as security, but they don’t actually need to: this kind of loan can be made without reference to a property at all.

In a Lombard situation you would place assets with a lending value of 100% of the loan amount, bearing in mind that if these were equities, the nominal or “face value” of the equities might actually be as much as 200% of the loan amount.

Now that the bank feels fully safe in its lending and the loan does not affect its Tier 1 ratio for Basel 3, it is possible to access the keenest rates anywhere in the market. Private banks are in competition with each other to find new clients with investment assets, which is why FPF always shop around to see who is prepared to offer the best lending rates for the mortgage.

Typical rates will be a variable margin below 1%; on top of this will be management costs which are also likely to be less than 1%.

When getting a mortgage from a high street bank, buyers need to know the LTV (loan to value) rate offered by the bank: this is the maximum percentage of the purchase price they are prepared to lend (usually around 80%). If the bank’s LTV rate is indeed 80%, they will lend €800,000 against a property valued at 1m€.

Private banks use a similar method when deciding how to lend against a portfolio of stocks, shares and bonds. This is called the lending value ratio or LVR. Depending on the types of investments in a client’s portfolio, the bank will decide on the LVR. Cash, of course, is king. The more speculative the asset, the less weight it carries in the eyes of the private bank. A schedule of how most investment types are weighted by the banks is laid out below.

These percentages show the nominal value, also called the face value, of a client’s assets and reflect what the client actually needs to transfer to the bank. For example, if the bank requires assets of 1,000,000 € in order to offer a mortgage loan, then a client could place two million in equities with them – or a combination of one million in equities plus 500,000 € in cash.

This mix-and-match approach is common: a private bank can survey the entire portfolio a client wishes to transfer (or create) with the bank and assign an LVR to each line.

Another example: the bank wants 1,000,000 € of assets under management (the LVR). If the client wants to offer the bank their mutual funds to manage and the LVR for these is 80% (see table), it means they would need to let the private bank handle 1,250,000 € of mutual funds (80% of 1,250,000€ = the requisite 1,000,000€).

A key question in finding the optimal relationship will be establishing the values each bank uses.

When buying a property via an arrangement with a private bank, the fees are as follows:

Property valuation fee

Once you have selected the private bank, the property will have to be valued. You can select a valuer from the panel agreed by the bank. N.B. Not all valuers are accepted by all banks so you’d be unwise to try and appoint your own; the bank will want to instruct him/her (and will send you the invoice). Costs vary from 2,000 to 7,000 euros depending on the scope and size of property.

Bank fee

The private bank will charge the client a feeto facilitate the opening of accounts and to set up the loan. These vary from bank to bank and may be called ‘arrangement fees’ or ‘account opening fees’. If a broker such as FPF has been involved in the process, it may be that the private bank pays a portion of their fees to the broker. We will always ensure that the fee structure is clearly explained to our clients well in advance – because it does vary from bank to bank.

Broker fee

For assistance in finding the right bank to match the requirements of a client’s situation and to optimise the conditions of the loan, a fee will be charged that is appropriate to the work involved and the context. Typically, the total combined bank and broker fees for opening the account and setting up the loan are around 1% , rising to 1.5% if the case is very complicated.

As previously explained, the private bank with whom you take out your mortgage is keen to increase the assets under their management and to actively help clients manage their investments.

There are two main types of contract or mandate you can give the bank to help manage these investments:

Discretionary mandate

This gives the bank the ability to buy and sell when they deem appropriate. They will follow a conservative, balanced or aggressive investment approach, according to an agreed risk profile. A mandate such as this has an average cost of 1%.

Advisory mandate

With this type of mandate the bank will provide advice and suggestions for when and what to buy and sell. This type of mandate can either have an all-in cost so you can trade as much as you like and might cost 1%, or it can be a lower ongoing charge plus costs per trade.

Other charges

There may also be an administration charge annually for reporting and general management of the accounts, and there may also be a custody charge for holding the assets to offset the costs of administration – usually the range here is 0.1% to 0.3%. Custody and admin charges are sometimes (but certainly not always) included in the discretionary/advisor mandate fees. The specifics of all this become more relevant if a client wants, for example, 50% of the portfolio in custody only as a long-term hold and 50% under management in a mandate.

Existing property

Private banks usually assign a lending value ratio of 50 to 70% of the valuation report price of any property a client wishes to include in their portfolio. This means that for existing property, things are quite straightforward. The property is surveyed, the value decided and the overall arrangement is agreed.

Off-plan and construction

When it comes to off-plan property, things become a little more complicated for the majority of banks as they are not comfortable lending on a property which is not yet built, under construction or undergoing heavy renovation.

The reason for this is that it is hard for the bank to establish the value of the property because of the additional risks that come with construction. In such cases, the majority of private banks will ask for additional collateral during construction, preferring a full Lombard loan secured purely against assets until such time as the property is completed, surveyed, valued, a mortgage registered and lending value ratio assigned. Clients can then switch to a mortgage loan on the property and reduce the amount of assets pledged to the bank when the time is right.

There are some options which do not require an initial Lombard loan and which allow construction to be financed up to 100% LTV, with 30% LVR in assets under management.

In terms of affordability for the loan, a private bank can be more flexible than a retail bank. As long as the assets are there, an experienced broker such as FPF can usually find a way.

Next up: one of the most common questions we get asked: ‘Why do some people get turned down for French mortgages’? We’ll go into all the details and explain the most common pitfalls, but the good news is that many people do not get turned down at all – especially when they speak to us first and we discuss whether it looks like a good idea for them to proceed…

Non-French residents can easily come unstuck when applying for a French mortgage – especially when they are going it alone and don’t really have much of an idea about the process. This is where we come in – we have decades of experience and many hundreds of success stories in which we helped clients to access some of the best loans on the market and go on to secure properties of their dreams.

If you’ve made it this far into our guide you’re clearly pretty serious about buying a property in France. And why not? There are a thousand things to love about the country – from incredible countryside and weather to amazing beaches, towering mountains, vibrant cities and the famous French joie de vivre that is known around the world.

Some mortgage applications quickly fizzle out, however: unsurprisingly, you can only turn a dream into a reality if you have the resources (and a few other things) to back it up. In this section, we explain why some applications don’t quite work out – so that you have a crystal-clear idea about what needs to be in place before you begin. Forewarned is forearmed, and all that.

As mentioned above, a private bank can fix some problems related to a lacklustre paper trail but they will always require more than €500k to be placed with them (so that it can be managed/invested) and usually more than €1M.

You can read more in our private banking guide here.

Currently, French equity release mortgages are not widely available from French retail banks. There is a certain logic running through the French property and finance markets which argues that you buy a property with a mortgage, you keep the same mortgage to the end when it is paid off – and that’s it. Even refinancing/remortgaging is a little frowned upon.

However, once we get to properties and transactions running in the millions, then the private banks can be more amenable to a clients’ specific needs as they see a mortgage as a means to begin new relationships. There are still restrictions, though, and it is far easier to release equity if there is some form of refinance involved – either from a shareholder loan or a previous mortgage on the property.

Many people will have bought property in France over the last decade and seen the price of their property soar by large percentages. For those who bought properties in France by releasing equity in the UK, the gains will be magnified by the current low trading value of sterling.

Restrictions on use of funds

Acceptable projects for the funds released from your French property

French private banks prefer to release funds for the following reasons:

• To pay off existing mortgages/loans
• To purchase new properties
• To improve existing properties
• To purchase high ticket items
• To create financial assets to be managed by the bank releasing the equity

As you’ve just seen, getting to grips with the French way of doing things can take some time, but it is almost always worth the effort. If time is something you lack, feel free to lean on us to help streamline the process and speed things up as best we can.

One thing we know quite a bit about is tax, which comes under the microscope in our next section…

As with all countries, France has a complex set of tax rules that all overseas buyers should consider and understand before taking the final plunge. They aren’t necessarily punitive or excessive (you may disagree), but you should never go into a major investment without knowing the immediate and future tax implications.

Tax – everyone’s favourite subject. The French tax authorities are sticklers for paperwork and are generally no more (or less) friendly than the tax men/women in any other country. If you know the rules, follow the law and do what you’re supposed to do, everything should be fine. To that end, a beginner’s guide to French income tax, CGT, property tax, inheritance tax and everything else should make for some joyful bedtime reading…

French Wealth tax – “Impot sur la fortune immobilière” – is an annual tax that is based on the net value of real estate held in France only. The calculation is based on the price the seller could be expected to achieve if the property was on the open market and sold as at 1 January in the year in question. From this value, any loans used for the initial purchase of the property or subsequent loans for renovation can be deducted. Tax is then due on the balance and is applied as below. The calculation only starts if you have net real estate assets over 1.3m euros. Unsurprisingly, this is a deeply unpopular tax among wealthy French citizens who may find themselves liable for tens of thousands per year if they live in a large country pile or a Parisian mansion.

– 800,000: 0%

– 800,000 to 1,300,000: 0.50%

– 1,300,000 to 2,570,000: 0.70%

– 2,570,000 to 5,000,000: 1.00%

– 5,000,000 to 10,000,000: 1.25%

– 10,000,000+: 1.50%

We see many people choosing to use a corporate structure to optimise the tax situation relating to their ownership of a property in France. We thought we’d share a few thoughts…

A big caveat before reading the information below is to say that this is just an overview of what we see, and what we understand to be the reasons for the choices buyers make. We are not in a position to give individual tax advice, so please don’t make any big decisions based on any of this information; instead seek advice from qualified professionals (we can help make connections if required).

Own name

Whilst holding the property in your own name is very tax efficient in France, it can be difficult to transfer shares of the property to children. If you plan to rent the property out then it is likely there will be no income tax in France, though the income will be taxed in the UK. You may be able to structure the purchase under the UKs ‘furnished holiday let’ rules – but this has to be checked carefully.

Unfurnished rental or optimised family home

Usually in cases like this, we might see an SCI used – it is a type of private limited company that can be set up in France. It is transparent for French tax purposes and opaque for UK tax purposes, so if a property is rented the income is sheltered in France where there is little tax to pay on the income as you can deduct the interest on the loan and a portion of the value of the property. Shares in the SCI can be transmitted to children.

Furnished, seasonal let and family home

For furnished rentals we see the SARL de famille being used – this structure is for close family members only. It is transparent for French tax so owners can use their personal tax allowances, but opaque for UK tax so the income is not subject to tax until the funds are repatriated to the UK. The shares in the company are transferable so inheritance tax can be mitigated.

Now you have an idea of some of the tax implications, it seems only right to look at some of the risks when it comes to buying a property in France. Our aim is to be as transparent as possible, so we’re always happy to help clients understand exactly what they are getting into. Luckily, in most cases, buying a house in France is a relatively straightforward and low-risk proposition, but as you’ll see in the next section, it’s important to consider the potential risks…

As is the case when buying a property in your home country, snapping up a dream home in France is never going to be risk-free. Run a mile from anyone who tells you it is! That said, there is much that can be gained from owning a home in France, and the old adage of ‘if you don’t try, you’ll never know’ is certainly true.

There are significant differences between buying and owning a property in France when compared to doing the same in the UK, and some of them come with a certain degree of risk that you need to be aware of. From fluctuating exchange rates to refinancing issues, we explore the main ones right here.

One of the main risks to your personal equilibrium – and perhaps your pocket – is thinking that France is like the UK (or other home jurisdiction). It is not. The French have a particular way of working and work to a different frame than most in the Anglo-Saxon world. Essentially, France is the only northern latin culture and unlike the south, where things can be a bit more laissez faire, there is an extreme rigor to the French bureaucracy. Rules are there to be followed.

Paperwork on another level

A newcomer must get used to the idea that all documents have to be sent and received in original, signed and initialled on all pages – with no mistakes or crossings-out allowed. It is very unlikely that standard processes can be deviated from; all any applicant can really do is grin and bear it and submit to the decrees of the banks.

Getting a mortgage on a leaseback property in France used to be incredibly easy. The French banks used an affordability calculation which turned out to be far too generous and everyone got badly burned when the financial crisis hit both borrowers and leaseback management companies guaranteeing the rental income. Since then, the lending criteria for French banks has become more strict and rental income is only taken into account under certain circ*mstances, such as when the bank is trying to convince its compliance department that the applicant will be able to afford the loan (something that is especially pertinent when an application is not as strong as it could be in terms of debt-to-income ratio). Usually, though, the borrower has to be able to afford the French loan without requiring the rental income.

Leaseback properties – important details

When buying a leaseback property there are a few things to look out for. It is important to look at the track record of the management company, perhaps looking closely at their finances. Many French banks will not lend on properties where there is guaranteed rental income. Even in cases where the property is designated as a ‘residence de tourisme’ and benefitting from a reduction in purchase price due to the VAT rebate that such properties enjoy, some banks will choose not to finance where a single management company is responsible for the common areas of the building as they fear a dilapidation of the building over time, leading to a reduction in the value of their security.

Currency fluctuations are something all potential French home-owners should consider. If sterling, for example, were to fall further, then financing monthly mortgage payments in Euros exchanged from UK earnings would become more expensive. Likewise, when it comes to selling, currency rates present another potential problem. If you bought for cash at 100,000 euros when that equated to £90,000 and then sold at a later date when 100,000 was suddenly worth £70,000, you’d be worse off.

It is generally accepted that it is safer to have your exchange rate risk based on the monthly mortgage payment rather than the value of the entire property. For example, it would be better to pay 20% more for your mortgage payments on a monthly basis than being forced to sell through a change in circ*mstances and finding the value of your property is 20% less than the mortgage used to buy it. In addition, if you receive rental income in Euros then it makes sense to have a loan that is also paid in Euros, which lessens any exchange rate risk.

In the current climate where the Euro is historically strong (November 2020), it is worth considering a 100% French mortgage in euros, if available, to reduce the requirement to transfer funds to Euros until the exchange rate moves in your favour – although this is, of course, a speculative move as rates go up and down.

Finally, a note on the risk of a lending rate changing once the mortgage application gets to the committee stage. No one likes it when this happens, but it can and it does. In 90% of cases the bank would impose no change to the rate, but if there are some risky elements or something unusual – or perhaps we are in a rising rate environment – the committee may increase the rate to maintain profitability on the loan for the bank.

That’s some of the potential pitfalls out of the way – but what about the many pluses when it comes to buying a property in France? There’s lots to like – as we’ll see in our next section…

In France it is the norm for a real estate investment to attract little or no tax in France for up to 20 years. Of course, you have to use an accountant to ensure your tax affairs are done by the book, but this is fairly standard in most countries. It is even possible to arrange it so that you will have no tax on the rental income in your home country.

You can read more about the tax situation in our guide to French property taxes.

Whilst there might not be a whole lot available in France when it comes to interest-only mortgages, if you can get one you can fix the rate for many years, pay almost no tax – and if you put down a 40% deposit, you probably won’t have anything to pay for almost 15 years as the mortgage payments should be covered by money you earn from renting it out

Buy-to-let mortgages in France are available at very attractive rates compared to those of neighbouring countries. However, an important point to note is that, unlike the UK and many other countries, French banks will always look deeply at the borrower’s financial situation and will be less swayed by the future potential rental income of the property.

A popular approach when it comes to buy-to-let investing is to seek a loan on an interest-only basis in order to keep the monthly payments low and to wait for the market to rise, then to release equity and continue to build the portfolio. However, owing to the lack of interest-only mortgages in France and the reticence of French banks to refinance interest-only mortgages, the more typical way of buying in France is to commit to a long-term hold on a repayment basis. This way, you get to enjoy the benefits of selling when the mortgage is completed or profit from the unencumbered rental income once the mortgage is paid off.

One caveat to the above is that there is more flexibility than ever when dealing with a private bank.So if the goal for a client is, say, to add value to a property and refinance, then a private bank may be a better partner – though there will be additional capital requirements in order to facilitate the expected wider relationship with the bank.

To add a cherry sur le gateau, French banks can only charge six-months’ interest on any sums you pay back early on the long-term fixed rate. So if you had a 2% fixed rate and wanted to clear 100k, you would just pay 1k in penalties.

And that’s it! You have reached the end of French Private Finance’s Ultimate 2023 Guide to French Mortgages for Non Residents: a collective 17 years of French property experience distilled down into one massive (but hopefully very readable) document that you can come back and refer to as often as you like. We hope you enjoyed taking it all in as much as we enjoyed putting it together.

To finish, we’ll end with a round up of our most common French mortgage FAQs, but if there’s anything else you’d like to know more about then please just drop us a line. We’re here to help!

How much can I borrow?

Most French banks will lend 70% – 80% of the purchase price, with some lending 100% (excluding the purchase costs).
Currently, all mortgages are status mortgages, meaning that the decision about whether or not to lend will be based on your personal status, so the banks will diligently look at your income and outgoings. Banks will allow you to spend up to a third of your gross monthly income (less any existing monthly repayments) on loans. They will also take a proportion of existing and future rental into consideration.

Can I borrow if I am self-employed?

Yes. There are several ways to present the necessary information to the bank – your consultant will find the best option for you. Please see the required documents for self-employed borrowers and feel free to contact us if you have any queries.
Check the list of required documents to apply for a French mortgage

What are the fees involved in getting a French Mortgage?

The banks we work with have a set-up fee that ranges from 0.3% to 1% of the loan amount. This is payable at the signature of the deed of sale.

The broker fees: we charge a fee of 1% of the loan amount in the event of a sale being completed (unlike some lenders, we don’t charge anything up-front). This fee is payable when the deed of sale is signed.

There are also the notary fees, which is the equivalent of the stamp duty. It is about 2% of the purchase price for new build properties or about 7% for existing properties. This is also payable the moment that the deed of sale is signed.

Additionally, there is the “frais de garantie” (‘guarantee fees’), which is a mortgage registration tax. There are two types of guarantees: privilege de preteur de denier (PPD) and hypotheque. PPD (circa 0.5%) applies to existing properties and hypotheque (circa 1.5%) to new-builds.

All the above costs are laid out in our Mortgage Information sheet – which all our clients will receive with their purchase guide from French Private Finance.

Is it ever possible for the broker’s fee to be waived?

Yes, sometimes. Some banks actually pay us what we call a “success fee” that is high enough for us to waive our brokerage fee. However, most regional banks do not pay us anything (or a tiny amount compared to the work done) so we probably will need to charge a fee. Any fee will be properly displayed in the purchase guides and the Key Fact Illustration.

What are the early repayment penalties?

With a fixed-rate loan, the repayment penalty will be no more than 3% of the amount you are paying off early, capped at six months interest on the amount you pay off. For example, with a rate of 2%, should you repay 100,000 €, the penalty would be 100,000 x1% = 1,000 €.

There are generally no repayment penalties for variable rate loans.

Please check this on your mortgage offer.

Using a bank or a foreign exchange broker

Not everyone is aware that there are alternatives to using a bank when it comes to making international payments; by using a specialist foreign exchange broker, you could save time and (often quite a lot of) money.

Unlike banks, currency brokers operate specifically to help you transfer your money and this means they can focus on securing you a better exchange rate and provide service to meet your individual needs. The benefits offered by each currency broker vary, but typically you’ll get:

• Better exchange rates
• Low or no transfer fees
• Faster transfers
• Better customer service

What are the advantages of a French loan?

In general, the rates are 1-2% lower than comparable UK rates, and the interest on French loans is tax deductible. For investment purposes, it is better that the exchange rate risk from sterling to Euro is on the monthly repayment, rather than the whole value of the property (we can explain why if needed – just ask). Also French loans offer very good long-term fixed rates that provide security at lower costs.

Has there been a change in the lending attitude of banks in France recently?

Yes, banks are becoming more cautious with their lending, particularly the BPCE group. We have had partners adding minimum income requirements, withdrawing from the non-resident market and also putting applications on hold for UK clients because of Brexit. This is where our expertise comes in – we have a multitude of options and solutions that most buyers are not aware of.

The mortgage requires a collateral fund. What is it?

The collateral is assets placed under management at the bank (private banks especially but also some retail banks, too). It will be invested in various funds including stocks, bonds and fixed term deposits. The actual asset allocation will depend on your risk profile. Together with your adviser, you can choose from a range of securities such as:

• IE00B3XXRP09 Vanguard SP 500 UCITS
• FR0007063177 LYXOR NASDAQ-100 UCITS
• LU0616240585 AMUNDI BOND EURO AGGREGATE

The collateral is locked until the mortgage is paid off but can be reduced so long as the initial collateral to mortgage ratio is maintained.

Why do the banks require so many documents?

French banks don’t have a Credit Check system, unlike the UK, so to get through the compliance and risk committees, they need to manually check your income documents (tax returns, for example) or bank statementsto check if there is no other debt and see how you manage your debt and expenses

What is the French mortgage application process?

The process of receiving a mortgage offer from a French bank can take anywhere from a few weeks to three or four months – depending on when you produce your documentation and how quickly we can achieve final approval from the bank.
Once you have decided on your French mortgage, you will need to send us the required supporting documentation. When the bank has a complete file, they will send you a final simulation before sending the file to their lending committee for approval. If all goes to plan, a loan offer will be made.

Upon receiving the offer, you must wait a minimum of 10 days before accepting it (or rejecting it) – a “cooling-off period”, if you like. You have one month to accept the offer. After you have done so, the offer is valid for up to eight months, depending on the bank, and you must complete the purchase of your property during this period. Extensions can be obtained in certain circ*mstances.

How long does it usually take to get a mortgage in France approved generally?

Getting an agreement in principle doesn’t take long – usually just a few days. But if we are talking about getting the application officially approved by the compliance and risk committees, it can take anything up to four months.

What are the payment options during the construction of a property?

Most banks will offer the opportunity for you to pay interest only on the sums drawn down by the developer during the construction. During this period the borrower must still pay life insurance. This period can last up to 36 months. Full payments can be deferred until 100% of the mortgage funds are released.

What are the current French Mortgage rates?

Forinterest only loans, you can expect a rate of 2.35% fixed on 14 years

For a repayment loan, we can usually access mortgages available at 1.65% fixed for 20 years at 70% LTV – or 2.25% on 20 years at 85% LTV.

Variable rates are available with some banks and these generally follow the Euribor 3 months + a margin. However, many banks don’t offer variable mortgages any more due to such low fixed rates.

What is the Euribor?

The Euro Interbank Offered Rate is the rate at which French banks and institutions lend money to each other. Most French banks with a variable rate base their lending rate to customers on the Euribor 3 month, plus their margin.

Check online at the Euribor – European Banking Federation

How can I secure a specific the rate?

In order to secure the rate that you have been quoted, it is necessary to send us all the required documents for the loan application. Upon receipt we can forward them to the bank that day, and reserve the rate for you. Rates can change twice per month, so speed is essential.

Why is my rate different than my friend’s?

This is likely to be because most lenders work on a regional basis. We have partnerships in place for prime locations: the Riviera, the Alps and Paris – although we can secure mortgages anywhere in France. We can only offer you the rates that are applicable to the area in which you are buying.

If we have a larger deposit, can we achieve a better interest rate?

Not necessarily, but it can sometimes help when negotiating.

What is the TAEG (Taux Annuel Effectif Global)?

The TAEG is the French equivalent of the APRC in the UK: annual percentage rate of charge. It includes the following costs (numbers are for the example):

+ Mortgage tax: €53,058.30

+ Collateral guarantee: €255

+ Life insurance: €117,600

+ Bank fees: €25,000

+ Broker fees: €29,400

+ Total interest: €555,176.80

Total mortgage cost = €780,490.10

+ Capital = €3,920,000

Total repayment = €4,700,490.10

The APRC calculation is a bit complex so you’d need to use excel to get to grips with it. The formula is =RATE(240,- 4700490.10/240,3920000) which gives a rate of 0.16% per month when rounded to the second decimal point. Simply multiply by 12 to get the annual rate of 1.92%.

Should I take a mortgage or pay the Wealth Property Tax?

The TAEG (French equivalent of the APRC in the UK) can be a misleading way of considering the overall cost of your purchase; another way to look at the annual cost would be: 780,490.10 / 20 = €39,024 (cost per annum). .As a percentage of the mortgage amount, this equates to 1% per year (€39,024 / €3,920,000 ).

If, however, you subtract your average annual wealth tax rate, the real cost of borrowing is effectively cheaper. This is because, if you didn’t have the mortgage, you would end up paying the French property wealth tax, which could be 0.5% of the value of the property. By having a mortgage, you don’t pay that 0.5%. In other words, borrowing can make sense.

Please note that French Private Finance does not advise on wealth tax. Always check with a qualified accountant.

What is non-resident income tax?

The rental income tax liability of 25% is charged for French non-residents who are members of the EU. This liability can be offset against:

– Purchase costs

– Furniture

– Loan Interest

– 80% of the value of the property

It should be possible to avoid paying any French income tax over a period of 20 years as a non-resident – depending on how the purchase is structured.

For French mortgage hunters looking to buy that dream French property, here are five top French mortgage tips to consider when looking to acquire finance in France.

1) Prepare to show ‘rainy day’ funds
Just like in the UK, there are additional buying costs on top of the deposit capital you are putting into the property. French banks will also want you to demonstrate that there is a buffer beyond this, i.e. ‘rainy day’ funds. They want to know that if anything unexpected happens, the bank knows you have the means to handle it.

2) Understand the eligibility criteria
French banks are keen to lend to overseas buyers – provided they meet their lending criteria. However, French banks do not have access to credit scoring data – which means applications are assessed on proof of income. Three years’ tax returns and three months’ proof of income are required for employed people, with three years’ accounts required for the self-employed.

3) Get professional advice
One of the main reasons French mortgage rates are so low is that the banks are competing heavily for buyers. As a result, an international broker specialising in French mortgages for non-residents will be able to offer products which are better than if a buyer was to go direct – and at no extra cost.

4) Be confident of rental returns
For leaseback properties and also standard buy-to-let properties, make sure you are confident of the returns, especially if you are factoring these into your mortgage payments. For leaseback properties, banks take the projected returns into account when considering the application, but you also need to be confident of the property’s ability to generate the rental income you need.

5) Understand the system
The French mortgage system is more regulated than in the UK, but this is what makes it so secure and is part of the reason why the banks can offer such low rates over such long terms. Of course, this can sometimes mean the application process takes a bit longer, but in the end it will be worth it.

Purchase price

This is the price of the property you are looking to acquire, excluding fees. It may include or exclude the VAT (known as TVA in France), depending on the type of property.

Mortgage Amount

This is the mortgage amount you want to apply for – or the maximum mortgage amount we can offer.

LTV

This is the Loan to Value. The maximum loan to value depends on a variety of factors.

Interest Rate

This is the rate being offered by the lending bank. Warning, the rate is locked only when the mortgage offer is printed – so there is a risk that the rate may vary.

Duration

The duration chosen for your mortgage. Most banks offer a maximum duration of 20 years.

Monthly Repayment

This is the monthly cost of your mortgage, excluding the mortgage insurance.

Insurance Premium

The amount that the mortgage insurance (which is mandatory in most cases) could cost you based on the original mortgage amount borrowed. We may be able to reduce it.

Deposit

This is the money from your own funds/savings that you need to put down in order to buy the property (not to be confused with Personal Contribution, see below), excluding fees.

Notary Fees

The French equivalent of the stamp duty – which is the same whether you are paying by cash or with a mortgage. This is payable at the signature of the deed of sale and is not something that can be added to the mortgage.

Mortgage Tax

There are two types of taxes here: privilege de preteur de denier (PPD) and hypotheque. PPD (circa 0.5%) applies to existing properties and hypotheque (circa 1.25%) to new build. For off-plan properties, the notaire will require a PPD on the part that is already built and a hypotheque on the remainder (which makes it cheaper for you). The notaire will confirm the final amount at the signature of the mortgage deed. This is payable at the signature of the deed of sale.

Broker Fee

We charge a fee of 1% of the loan amount in the event of a client’s purchase being successfully financed by a bank. This equates to a very small percentage of the loan amount over the life of the mortgage. Our goal is to try and secure you a 20-year fixed rate at 1.5% so that you don’t need to refinance every 3-5 years (and incur repeated fees) as one might in the UK. Depending on the bank, the complexity of the borrower’s profile and the mortgage amount, we work a total of 10 to 30 hours on each application. This is payable at the signing of the deed of sale.

Bank Fee

Each bank has a different fee structure; the banks we work with tend to offer rates that range from 0.3% to 1% of the loan amount. Financing non-resident buyers requires expertise and more time than arranging a mortgage in your home country. The process will take up to 4 months (occasionally even longer for bigger deals) so the lender charges accordingly. This is payable at the signing of the deed of sale.

Personal Contribution

This is the total money you need to pay from your savings and it is payable at the signing of the deed of sale. For off-plan properties with stage payments, you must pay your deposit first before the mortgage kicks in.

Collateral Required

When dealing with a private bank, you can decide together with your adviser how to invest your portfolio. Anything with an ISIN number can be considered as long as it’s easily understood by the banker – but it needs to make sense from a risk perspective since the funds are collateralised against the loan. Please note that French Private Finance cannot provide investment advice.

Total Interest Paid

This is the amount of the interest that will be paid over the course of the mortgage if you do not make overpayments.

Total Insurance Paid

This is the amount of the mortgage insurance that will be paid over the course of the mortgage if you do not make overpayments.

APRC

This is the actual percentage rate you will pay on your purchase and includes the mortgage rate, mortgage insurance rate, bank fees, broker fees and mortgage registration tax.

Total Cost of the Loan (fees + interest + insurance)

This is the total cost of your loan paid over the course of the mortgage if you do not make overpayments.

Total Deposit (including fees and collateral)

This is the total amount that needs to be paid upfront to the bank.