Whilst there are many similarities between the UK and French mortgage systems, the standard eligibility criteria for a French mortgage can be very different, and often takes our readers unawares. To avoid any unwelcome surprises, Fiona Watts, from International Private Finance, takes you through the basic eligibility and affordability criteria that the French banks apply to all non-resident borrowers.
1) must be older than 18 and younger than 68 years of age
French banks want to see that you have repaid the French mortgage by the time you are 75 and the minimum term of a French mortgage is 7 years.
2) You must need to borrow over €100k
The main lenders to non-residents in France have a minimum loan amount of €100,000. You may find a bank manager, local to the property you are looking to purchase, with the authorisation to loan slightly less but these will be the exception, rather than the rule.
3) You can’t be paying out more than 33% of your monthly income on ‘contractual debt’
Unlike the UK, where the banks primarily only look at your income to calculate the affordability and your maximum borrowing amount, in France they use a ‘debt-to-income-ration (DTIR). They do not want to see more than 33% of your monthly income taken up by contractual debt (mortgages (including the new mortgage you are applying for), rent, child maintenance, unpaid credit cards, car and personal loans).
4) You need to be able to put down at least a 15% deposit and pay for the notaires fees
The maximum LTV (loan to value) available to a non-resident is 85% of the purchase price (including estate agents fees, but excluding the notaires fees, as the bank will not allow those to be added to the loan amount). Your deposit should also not come from a loan, a recent release of equity from another property or a gift, as the bank want to see that you have been able to budget and save over a period of time. If you are willing to place significant assets with the bank (so typically a cash deposit of around 20% of the loan amount for the lifetime of the mortgage) some banks may be willing to lend up to 100%.
5) You need to be able to show a “capacity to save”
French banks do not want to see that you have used up all your savings to purchase the property and will look to see that you have at least 6 – 12 months’ worth of monthly mortgage payments left over after you have completed the sale.
6) You must not regularly exceed your overdraft facility nor have a bad credit history
Fairly self-explanatory, but banks do frown on any unauthorised use of credit.
7) You need to be able to provide at least 3 years of tax returns if you are a business owner or sole trader, or in the case of an employed person, you must have passed any probation period and be on a permanent contract
French banks want to be satisfied that your future earnings are not likely to materially change. If you are self-employed they will use your completed tax returns for the past 3 years for your proof of income.
8) The property you are looking to purchase must be a habitable residential property
The French banks will not grant a residential mortgage on a property that is fundamentally a commercial venture (or a property they believe you may convert into a commercial venture, even if you tell them you aren’t going to!). So properties with gites, campsites, fishing lakes, vineyards, outbuildings that you could convert attached may be rejected. They also won’t finance chateaux, as, over the years, the banks have had too many owners default on the mortgage payments as the chateau’s upkeep costs have spiraled and have then struggled to sell them on once they’ve repossessed them.
*Residency, in this case, is based on your tax residency status, rather than where you live.