french mortgage for non-residents explained
what are the most common questions about obtaining a french mortgage when you are not a french resident?
how much can i borrow in france?
Often French banks can change at the last minute after often after having assured you obtaining it would be no problem. Our broker can avoid this embarrassment as they know French banks inside out and meet with them regularly. Even if at this point the broker does not run any credit check, they can give you a decision in principles. That is of course if you give them all the information requested.
It is accepted that you can borrow up to 5 times your annual combined income after you have deducted your mortgage or long term loans.
Of course, each applicant will be individually assessed and each file can be different depending on whether the applicant is self-employed, has a regular salary, commission-based income and of course the amount plays a big part as the higher the income, the more normally still available after paying a mortgage for example. More on debt-ratio calculation later.
For interest-only French mortgages, it is double the amount (10 times annual income) but you usually need assets (outside your main residence) equivalent in amount to the loan you request. Also, interest-only French mortgages are not that common in France so do check with our broker if you are eligible.
Our broker will be able to calculate precisely the amount you can borrow as well as your monthly repayment including all fees but a simple rule of thumb to calculate your French mortgage is:
French mortgage to spend each month equals your annual combined income x 33% divided by 12 minus your current monthly mortgage/loan/rent repayment.
If we take a combined income of 90,000€/year, 33% is 29,700€ divided by 12 equals 2,475€ minus mortgage/loan repayments of 1,200€/month giving you 1,275€/month to spend in French mortgage repayments.
Basically and in general the 33% debt ratio is used when you apply for a French mortgage. In simple terms, it means that your monthly repayments including the French mortgage should not go above 33% of your gross earnings (or net profit if you are self-employed).
So if you earn 3,000€/month, your monthly outgoings (mortgage or rent + loans) and French mortgage future repayment, should not go above 1,000€/month.
Yes, often French banks will take into account the income that you receive from your buy-to-lets at the rate of 80%. You will be able to add 80% of the rental income received from buy-to-lets to your annual combined income.
Formula is annual gross income or net profit self-employed + 80% rental income received x 33% / 12 gives you what you can spend on the French mortgage.
what are the steps for a french mortgage?
Applying for a French mortgage can be a “strange” and nerve-wracking experience (at best of times) for many of our international clients as French banks do ask for some rather strange (and also plenty of) seemingly unreasonable documents…Having said, one has to also understand that a bank lending to a foreign national with no asset or job in the country does convey an added element of risk for them.
Our main tip is, use a broker (after weeks of back and forth with a French bank you would understand) or at least a French bank with an international office specially dedicated to non-resident clients (we can happily advise). It will be plenty of time saved as well as headaches.
The broker will remove all communication needed with the bank. Attendance is usually poor considering the few hours they are reachable due to the 35/hour week, also many mums do not work on Wednesday in France as schools close, the many in-house training courses and not to mention the numerous sick days and bank holiday as well as 5-6-week holidays/year. Let the broker deal with that and just make sure you send the documents he/she is asking for.
Once you have understood this, the whole process is pretty straightforward and the rates much lower than in most countries. So that is definitely a good point!
The full process from start to finish when applying for a French mortgage is anything between 2-4 months on average. Now, with some very “naughty” clients who would simply think there are better things in life than providing official documents for a French mortgage (might be right…), we have had delays of up to 6 months from the moment they applied…
At FindHomeAbroad, we deal mainly with French new-build properties, often sold off-plan and sometimes the exchange of contracts can be 6 months away or more from the moment you reserve the property, so the best thing is to get a decision in principles and speak to our broker.
French mortgages are usually valid 6-12 months for non-residents but our broker can explain in more details the best way to proceed.
1- Knowing that you can get a French mortgage, otherwise called a decision in principles. If you are clear in detailing your income and debt/repayment (see above), it is pretty straightforward for the broker to tell you if you can or not get a French mortgage and what maximum amount.
2- Build your application Now comes the painful part…gathering the documents that the broker will require from you. Again do remember that these documents are in a foreign language so it is more work for the bank and they are lending to a person with no asset or wages slips in the country so they need to be extra diligent.
Try to be swift and efficient and do not delay as we see over and over again files that need to update bank statements because the whole process has been delayed…
3- The mortgage application officially starts at the French bank and they will put together your file/documents and have your file audited/approved by the audit team. This is usually the slowest part as French bankers do seem to need plenty of physical meetings to approve and usually, they do not tend to be physically present…a lot…
Our broker works with the main French banks dealing with non-residents but also local bank agencies that sometimes have better deals or more relaxed conditions. Private banking is also an option for some of our high net worth clients, often 30% in collateral is needed).
4- Getting the life insurance and French bank account. Life insurance is an obligation, the good news is that our broker can usually negotiate the most economical ones as the ones from the same bank tend to be more expensive.
A French bank account is then opened under your name even though, we have known some French banks who can lend you 300,000€ but do not offer to open a bank account…weird… You have Britline where you can open an online bank account if you need to.
It is best to have a French bank account for when you need to pay utilities and property tax. Once you have a proof of address there are many online banks that you can also use, some with several currencies and no exchange charges.
5- Finally, the offer is ready (offre de crédit) and sent to you. You will need to sign it (some local French banks insist on you going to sign it physically but it is rare especially with digital signing becoming more and more popular in France, especially after COVID.
You have a 10-day cooling-off period once you receive the offer, so you need to sign and return after the ten days.
6- Exchange of contracts (deeds) is then organised and we assist you all along the process. Usually, you have two options: or you exchange contracts in France at the Notaire or we use a power of attorney in your country for you to sign/legalise so that you do not have to travel to France.