Obtaining a Mortgage in France…Today!
Volume XX, Issue 33
Obtaining a mortgage in France, especially for Americans, is an ongoing, ever-changing situation. What you discover, even as recent as one month ago, could no longer be true.
We work primarily with Kim Bingham, an international mortgage broker with Private-Rate.com. Kim was once a Property Consultant for the Adrian Leeds Group before getting her broker’s license and landing such an important position. We trust her to do the best job for our clients.
This week, she addressed my team with an update on the state of property loans after doing the rounds of the banks and insurers with whom she works.
She has been very fortunate this year that over 90 percent of her loan applications were approved, however, she told us that there’s been an ongoing problem in banking that is resulting in an increase of refused loans. The refusals are a result of a combination of rising interest rates and the usury rate*, which is the maximum allowable cost of lending set by the government and revised by the government every three months.
*The term usury rate refers to a rate of interest that is considered to be excessive as compared to prevailing market interest rates. They are often associated with unsecured consumer loans, particularly those relating to subprime borrowers.
The usury rate is at 2.57 percent and will be revised (likely raised) in October. The banks’ interest rates have been rising throughout the year and are forecast to continue on an upward trend. Quotes on non-resident rates she received this week are 2.30 percent for a loan of 20 years in the South of France/2.40 percent in Paris; 2.20 percent for a loan of 15 years in the South/2.30 percent in Paris.
Because of the small margin between the interest rates and the usury rate, once the cost of mortgage insurance and bank fees are added in, the cost of the loans has been surpassing the usury rate. And of late, many loans are not getting approved.
The banks are favoring shorter-term loans of 10 years (currently quoted 2 percent non-resident interest rate in the South and Paris) because there is more of a margin to fit in the cost of the loan insurance and the bank fee under the usury rate.
Note: These bankers aren’t favorable to doing loans for SCIs (Société Civile Immobilière) because they are more work to complete, but purchases through an SCI aren’t affected by the usury rate!
Kim was told by her lenders this week that they aren’t looking at new loan applications until October, after the government announces the new usury rate. Most loan requests they’ve gotten lately won’t pass under the current usury rate. One bank said that a borrower over the age of 50 looking for longer-term loans (15 and 20 years) would currently have a hard time getting approved.
Hopefully, this will change in October after the new usury rate is announced. The banks might also raise their rates then, as they tend to change monthly, so this problem might continue…
So, for our non-resident clients, the banks she spoke with in Paris and the South said that there’s little use in signing a Promesse or Compromis de Vente this month for which a loan application must be submitted since that will be lost time on the contract—they won’t be looking at new loan requests until October after the new usury rate is announced.
Note: The average time to process a loan once the Promesse or Compromis de Vente is signed is a minimum of three months…and often longer. The seller must be willing to agree to this delay and this can sometimes be difficult to achieve. We have a difficult job balancing the needs of the buyer with the demands of the seller, so please keep this in mind if you need the mortgage to complete the purchase. There is also post-financing available, so be sure to ask Kim about that, too!
For more information, or to secure a mortgage, see our financing page https://adrianleeds.com/invest-in-france/get-financing/ and be sure to let Kim know we sent you to ensure that you will be taken care of as best we can!
The Adrian Leeds Group
P.S. Considering a property purchase in France? Don’t do it lightly. Let us help you make the smartest decisions to ensure you make the best investment you can. We can also expertly advise you how best to create a profitable rental. Contact us to learn more.