Mortgages continued... France

Tuesday, July 15, 2014

Mortgages continued... France

So many British buyers in France do the same as the French, and loans on offer are generally the same for foreign buyers as domestic ones. "But note that life assurance is compulsory in France when taking out a mortgage - not just strongly suggested as in the UK," says Busby. "It is sold with the loan and the additional cost could be 0.25 per cent on top of the rate - so you pay 3.75 per cent rather than 3.5 per cent." Rates are currently around 2.5 to 4 per cent, suggests Conti, and unlike many other countries where the best rates are limited to those with the biggest deposits, there are many good deals which require just a 15 to 20 per cent down payment.

Seventy per cent LTV is typical for an investment property. Mortgage types are pretty similar to those available in the UK, so rates can be fixed, capped or variable, and although there are some interest-only options, deals tend to be on a capital repayment basis. "Long-term fixes have been very attractive with British buyers but equally, it's been quite high-end market for us in the past six months and with many people thinking of clearing their mortgage sooner rather than later, they are taking variable deals," adds Busby. For Athena, for whom the Alpine market has been especially strong this year, the average loan is €450,000 to €500,000 - up from €250,000 a year before that.

So what about the French lenders' criteria?

As you'd expect of the famously bureaucratic French, getting a mortgage is a paper intensive process. "French banks love documentation. They do forensic checks, looking at the last three months of bank statements and pay slips and you can spend one-third of your gross monthly salary on total borrowings," says Busby. "As a rule of thumb, for each €100,000 you want to borrow, it will cost €500 a month. This consists of €420 a month to borrow €100,000 over a 25-year term, plus 1.5 to 2 per cent of costs: 0.5 to one per cent bank fee, plus 1 per cent mortgage registration tax; then also a notaire fee of 2.5 per cent to 6 per cent, [depending on whether it's a new-build or resale property; there are various sliding scales on the latter, and cost goes down as property value goes up]." As another rough rule of thumb, the cost per €100,000 is around 3.5 per cent.

Off -plan properties: peace of mind in France

In contrast with Spain, in France you can get finance when buying off-plan, as soon as 50 per cent of the development has been sold - and thus is under bank guarantee. "So you can get firstly get a loan, even though it hasn't been built, plus in addition you get the peace of mind that it will be built," says Busby. Athena suggest speaking to your broker early on in the property-hunt process, and getting the application in order. A mortgage application can only take two weeks, but 4-6 weeks is more typical in France. "Note that all the same deals are available through banks and brokers [unlike the UK where brokers don't access all the same deals that banks offer] and there is no broker fee," concludes Busby.

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