What type of French mortgage can you obtain when you are a UK or non-French resident and what you should look for?
Whether you wish to purchase a French property to enjoy during your holidays or if you wish to live several months a year with your family(over six months a year you may well be considered a French resident). France, due to its superb scenery and way of life, has always attracted foreign buyers. Not to mention the weather which is usually better than in the UK!
You can also find destinations for everyone whether you prefer the big city, a tranquil sea resort, a retreat in the French countryside or the beautiful French Alps and its hundreds of exciting ski areas. Also, the variety of French cuisine (and cheeses) is certainly a further point to consider.
Purchasing a French property with a French mortgage (in Euros) very often does make sense. Especially if you are thinking (like 80% of buyers today) of doing some rental… You will be paid in Euros, so an excellent and easy way to pay off the French mortgage in the same currency. You should enquire and compare first as you have about six major French banks that offer loans to foreign residents. The choice is more restricted than if you are a French resident working in France but there is still a good choice of options. At Findhomeabroad our consultant Jonathan has access to all the French banks currently offering loans to non-French residents. It is a good idea to contact our team, for example for a decision in principles.
If you’re considering acquiring a new property in France, you might need to get a French mortgage to do so. There are some outstanding French mortgages on offer – but it’s important to research the choices available thoroughly. Choosing the wrong product for your needs can mean your French dream home is much more expensive than it should be.
Here’s an overview of the mortgages available for UK residents buying property in France, how to get one, and how to make sure you avoid any unnecessary costs and charges.
French mortgage for non-residents
If you’re buying a home in France for school holidays, or plan on living in France only for a small part of the year (under 6 months), you will be classed as a non-French resident. Major French banks will offer mortgages to the UK and other foreign customers. The terms and conditions – and application processes – will be slightly different from those offered to French residents. Rates are usually a little bit higher but with French mortgage rates usually extremely low they are still very attractive.
French property for sale
Cosy hideaway: if you buy a French holiday home you’re likely to be classed as a non-resident.
Alternatively, you could get a mortgage from a UK bank, or remortgage your UK home, to pay for the new property in France.
It’s worth noting that Brexit might have an impact on how easily UK citizens can access funds for overseas property – although experts broadly agree that there are unlikely to be any restrictions on owning French property even after the UK leaves the EU.
Choosing a mortgage from a French bank
French mortgage products tend to come with fairly low-interest rates, and there are often good fixed-term deals, which allow you to lock in an interest rate for many years. This can offer a degree of reassurance, as you know the euro costs of your mortgage will remain the same for some time.
However, the big unknown with a French mortgage is how future exchange rates could impact the amount you need to repay. If the value of the euro increases, your mortgage effectively becomes more expensive if your usual income is from the UK, and paid in pounds.
Choosing a mortgage from a UK bank
Some UK high street banks offer specialist mortgage products to British customers looking to finance an overseas property purchase.
In fact, some customers might find it easier to get a mortgage in the UK than in France, as British banks can access your UK credit history, which might make it easier to get a loan approved. Dealing with a UK bank also means that the mortgage types on offer are familiar, banks are FCA regulated for security, and all documentation is available in English.
How to get a French mortgage?
The exact route you take to arrange your mortgage will vary depending on your personal situation. Here’s an outline of the basic steps you can expect to take.
In most cases, banks in France can lend up to 80pc of the purchase price of the property. However, you must fulfil strict affordability criteria that take into account your debt as a percentage of your annual income – and how reliable that income is.
In most cases, the annual costs of servicing your total debt can not exceed 33pc of your eligible earnings. If your income is not stable, this requirement might be even more strictly applied, although it might be relaxed if you’re in a high earning job that is relatively secure.
Getting a mortgage in France
Choose a mortgage broker if you would like to use one
Select the right bank for your needs, and ask for a pre-approval mortgage decision in principles. It will show you how much the bank will be prepared to lend you, once you find a property.
Choose the property you want to buy, and have an offer agreed by the sellers – a French bank will not finalise a mortgage until there is an agreed sale
Present the documentation needed to the bank to proceed with the mortgage – this will include your passport, tax information, wage slips, bank account statements to show your ability to repay the loan, proof of the sale and deposit payment
Have a survey done on the property, if required by the lender
Pay the fees and costs agreed in the mortgage offer
Getting a mortgage in the UK for your new property in France
Choose the right bank for your needs – you don’t necessarily need to use a mortgage broker if you don’t want to
Get a mortgage in principle, or pre-approval certificate so you know how much the bank will lend you. You’ll often have to pay a certain amount as a holding fee to lock in the interest rate you’ve been offered
Choose your new French home, and have an offer agreed by the sellers
Take your documentation to the bank – this will include your passport and wage slips, and bank account statements to show your ability to repay the loan
Your lender might require you to have searches and a survey done on the property, before the mortgage is completed, to ensure it is structurally sound and there are no legal issues with the purchase.
Pay the fees and costs agreed in the mortgage offer
It’s normal in France to pay a 5pc deposit for a new-build property that you choose (10pc deposit for a resale property over 5-years old). This means you will need to transfer a large sum from the UK to France to secure your dream home.
Pay the reservation deposit and the stamp duty and fees
As well as the deposit, there will be legal fees (include stamp duty) as well as French mortgage duties to pay on top of the house purchase price, which might mean you need to make large international payments to your notaire (solicitor) and the local authorities in France. Fees and duties will be as much as 4% of the cost of your new home on average for a new-build property in France (more like 9% for a resale property over five years old).
It will be tempting to use your bank to send those international payments, but that might not be the best idea. Many banks charge high fees to send money abroad, or they mark up the exchange rate or both. Either way, you end up spending more than you should.
Instead, try GCEN. GCEN is a service that specialises in international currency transfers, and it always gives you the real exchange rate for a low, upfront fee. In fact, sending money with it can be up to eight times cheaper than using a high street bank.
GCEN is FCA-regulated, so even though it’s much cheaper than a bank, it’s just as safe. And the website and app are devoted to nothing but international payments, so they may well be easier to use and more convenient, too.
And if you’re going to spend a lot of time in France, or need to make a lot of euro transfers, GCEN’s borderless account could be really helpful.
It’s free to open, and lets you hold up to 40 currencies and convert between them whenever you need. With a borderless account, you can convert pounds to euros when the exchange rate is good, then keep the euros on hand for any payments you need to make to France.
French mortgage rates and calculator
French mortgages are linked to the Euribor rate (Euro Interbank Offered Rate). If you choose a tracker mortgage, the interest rate you’re offered will track the Euribor rate as it moves up and down. It is also possible – and increasingly popular – to choose a fixed-rate mortgage which means you know exactly what the euro repayments on your mortgage will be for a fixed period.
You can calculate the cost of French mortgage payments here.
Cost of getting a French mortgage
The most popular mortgage types in France are variable rate trackers and fixed-rate products. It is possible to get an interest-only mortgage, although these are different from those on offer in the UK, so you’ll need to read the small print carefully if you’re considering one.
Whichever mortgage you go with, you’ll likely need to pay some extra costs. For instance, there might be a down payment, broker’s fee, closing costs, or other costs – even before you start making monthly mortgage payments.
If you need to send any of these payments to France, you might want to avoid doing so with a bank. Many banks mark up the exchange rate – which is like a hidden cost – or charge high fees. Instead, try GCEN – a service that focuses on international payments. With GCEN, you always get the real exchange rate, and the fee is always low and upfront.
And if you’re going to make a lot of international payments, GCEN’s borderless account will be a good fit.
Tax considerations and deductions in France
French law has a number of differences compared to the UK approach. Make sure you research in advance, to avoid any nasty surprises.
There are two local taxes that are linked to property ownership in France, called the taxe d’habitation and the tax foncière. These are set by the local region, so you’ll need to check out the costs in the area you’re considering buying in.
French holiday home
Be prepared: make sure you’re familiar with French law before you start
If you’re earning from your property – as a holiday rental, for example – you may also be liable to pay income tax in France depending on your tax residency status. Taking expert advice is always a smart idea.
Finally, it is important to know that French inheritance laws are quite different from those in the UK. Children have the right to inherit a certain proportion of your estate, while a surviving spouse has fewer rights than you might be used to. It is, however, the residence of the defunct which defines which national lay applies. If you are a UK resident it will be UK law. Do not hesitate to double-check if in doubt.
If you intend to keep your French property for the long term and pass it on through the family, understanding these rules will be critical.
Buying a new property is exciting, and a property in France, whether for holidays or to live overseas full time, can be both great fun and a strong investment for the future.
However, if you’re buying a new home abroad, you’ll need to do some research in advance to make sure you get the best mortgage for your needs – and without paying more than you have to. Get some expert advice, and take the time to consider all your options, so you can relax, knowing you got the very best deal on your French mortgage.