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Financing your property in France

Finding a mortgage in France to suit your needs is a straightforward process. Mortgage lenders such as UCB (formerly Abbey National) HBSC and Barclays, plus a host of other French banks, offer a variety of loans of up to 85% of the property value, often for up to 25 or 30 years. In addition, banks in France can often lend for renovation work on the property.

Click here to download a PDF document with a list of paperwork needed for your mortgage application

Please read on to find out what type of mortgages you can get in France including facts and figures about borrowing to buy in France.

TotallyRiviera have a comprehensive list of mortgage lenders, brokers and mortgage information on our useful links page. If you would like to start building your mortgage file immediately, which is never a bad idea, please see our information about mortgage administration.

How much can I borrow and in what way?

Non French residents should be able to borrow up to 85% of the property purchase value. The loans can be for up to 30 years, depending on age and bank chosen and the long-term rates (after any introductory offers) can be as low as 4.3% for a repayment loan. You can discuss with the bank which is the best product for your project or speak to an independent mortgage broker who can help you choose the best product from a range of banks. Check that the broker is independent, regulated and free of charge.

Interest only mortgages

Interest Only mortgages are now becoming more popular in France. There are three main types of Interest Only loan.

ASSURANCE VIE LINKED: Available for some time now, you take a 100% Interest Only loan and are place your deposit (minimum of 20%) into a French investment scheme which runs along side the mortgage. These schemes can have significant inheritance planning advantages and can offer flexibility if you are going to buy and sell a lot of properties as they can be kept as the deposit for the next purchase. We can give you the details of a qualified and regulated 'courtier d'assurance' in France who can assist with the mortgage and broker these for you should you wish to discuss this option.

DUAL PHASE: Some banks also offer a product which is Interest Only for 5 or 10 years and then becomes a repayment loan for 15 to 20 years. This is particularly useful if you believe you will pay off large sums or sell the property in the first period.

ASSET BACKED: One bank now offers an Interest Only product which does not require a deposit into an investment scheme and does not have a second repayment phase. You simply need to provide evidence of your other net assets up to a value of between 120% and 150% of the loan amount. So, for example if you have a €200 000 mortgage you will need to show other net assets (shares, cash, investments, property etc) valued at up to €300 000.
At the moment Interest Only loans are available at interest rates of around 5% for 80% mortgages.

Buy to let mortgages

Many people ask if they can buy on a buy to let basis, and the short answer is no. Future rent can be taken into account. The bank will only take 80% of possible 'long term, unfurnished' rental income into account, which is considerably less than what you will probably achieve through seasonal weekly lettings.

Fixed or variable

There is now a huge range of fixed, variable and capped rate products on the market, for repayment loans as well as interest only… each has pros and cons. It is safe to say that if you have fixed rate or a generous capped rate there are likely to be penalties for early redemption. The higher the rate the more flexible the product tends to be.

I have the cash, why should I bother getting a loan?

We often have clients who would prefer to buy in cash, but is this a good idea? There are many considerations to this argument which include:

1. Interest rates – if you can secure a loan in France for as little as 4.3% and can net a greater return on your capital at home then why not take the loan?

2. Currency risk – if you need to send a large amount of another currency to France to pay for the property, then you will automatically be exposed to a currency risk. If you are considering renting out the property you will probably (or can choose to) receive Euros which could then reduce your currency risk further by paying off the loan, meaning you don’t have to send money to France on a regular basis. You can, of course, minimise your exposure to currency risk by using an exchange broker, click here for more information.

3. Having a loan in France can also be a good idea if the value of your French assets is or could soon be €760 000 or more, as the French administration charges an annual Wealth Tax on your NET assets above this level. The best way to avoid this tax is to have a loan which brings this net value to below the level.

4. If you are going to rent out your property then the interest repayments you make on the loan can be off set against the profit from rent, thereby reducing your Income Tax liability too, which should be declared in France every year.

For more information on mortgages, or for expert advice check out our useful links page.

Information supplied by Peter Brooke from Spectrum-IFA