There is every reason to take advantage of the low interest rates in France if you can. Thanks to our excellent relationships with local mortgage brokers, we can help you get the financing you need.
Going directly to just any French bank as a non-resident can be difficult if not impossible. Unless you have a regular salary going into a French account, they tend not to be interested in dealing with foreign clients.
The good news is that obtaining a mortgage here can be doable. There are a few options, including applying with a French lender that specializes in non-resident/foreign clients. While there are fewer and fewer banks that will to do this, we do have relationships with those banks that are willing.
French Loan Facts
Who the lenders are
In France there are lending institutions that specialize in mortgages designed specifically for non-residents...but not many, and fewer now for American borrowers due to the FATCA regulations (Foreign Account Tax Compliance Act). That doesn’t mean it’s impossible! Just a bit more difficult! But thanks to Adrian Leeds Group’s select mortgage brokers, we can assist you with your applications to these lenders.
WHAT QUALIFIES YOU FOR A LOAN
Loans are income based in France and as such, existing assets do not play as big a role in determining how much one qualifies to borrow as in North America. That amount is calculated as the difference between the current debt service ratio (current monthly obligations as a percentage of monthly gross income) and a maximum of 33%. In other words, the new monthly mortgage payment, when added to existing monthly obligations cannot exceed 33% of gross income.
Net rental revenue on existing investment properties may be considered as income as would investment income. Car payments, other mortgages, rents, and other debts are deducted from gross income. Consumer debt (credit card balances), taxes, and insurance premiums are not deducted from gross income.
The maximum term of the mortgage is calculated roughly as 75 years less the borrowers age. A mandatory life insurance policy, valid for the term of the mortgage, secures the loan. This is a big reason age is so important –– because the premiums for the insurance policy become prohibitively high as age increases.
Life insurance is mandatory
It is a requirement of the banks that all property be secured by a life insurance policy, so in the event of the borrower’s death, the property is free and clear for inheritance purposes. The policy must apply specifically to the mortgaged property. Normally, the policy is provided by the lender’s associated insurance company, but not always. The borrower must complete a medical questionnaire and often undergo an exam to qualify for the insurance and therefore the loan.
how much you can borrow
Traditionally up to 70% or 80% of the appraised value of the property can be borrowed. The lender will normally appraise the property at no cost to the borrower, but appraisals are not always done.
The mortgage will not cover notarial taxes and fees
The mortgage will cover agency fees if the agency fees are paid by the seller. If the fees are paid by the buyer, then no, the mortgage will not cover the agency fees.
The mortgage can cover renovation costs
The mortgage can cover renovation costs, based on an appraisal of the property after renovation. The lender will require estimations for the work by licensed contractors.
The types of loans that are available include:
- Fixed rate
- Interest Only
- Combination Loans
Each lender offers a variety of different products.
Current interest rates are based on the Euribor
The current interest rates are based on Euribor plus a margin, often 3-month or 12-month. The Euribor is the money market reference rates for the euro: http://www.euribor.org
- We highly recommend understanding your borrowing power before visiting properties.
- Those on the title deed of the property are held responsible for repayment of the mortgage.
- Your payments will be automatically deducted from your French bank account.
- We recommend you consult your accountant or tax attorney for advice regarding mortgage interest deductions on your tax return.
Your Mortgage Broker in France
Kim Bingham is an international mortgage broker, securing loans for non-resident buyers purchasing property across France. After a successful start as a property search consultant then real estate agent in Paris, in 2017, Kim established the team of international mortgage brokers at Private-Rate.com. Kim works with clients worldwide, finding financing solutions adapted to each client’s needs and French real estate projects.