AN OUTLINE OF FRENCH MORTGAGES AND FRENCH BANKING PROCEDURES
This is to give an idea of the French banking and mortgage
system, which differs a great deal from the British
system.
Property
prices are still relatively lower in some regions of
France than they are in the UK and part of the reason
for this is linked to how the French banks calculate
how much can be borrowed. This calculation will also
be used if you intend to rent, take out HP on a car
or any other financial transaction that involves credit
in France.
The
French lenders generally will estimate that 33% of total
income (joint income if there is more than one buyer}
should be available for all financial outgoings. If
a gross income is £1000, then £330 is available
to repay all financial commitments, and that includes
all UK rent, mortgages, loan repayments, etc. Any spare
income after these have been deducted could be used
for the repayment of a French euro mortgage.
A French bank will take a first charge over the property
as security and will lend over a term of 20 years or
up to 25 years from a few lenders. Mortgages in France
are usually repaid by the capital and interest method.
Investment product mortgages and interest only have
recently become available and life insurance will be
required to cover all loans.
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There are fees associated with borrowing in France.
This would include an arrangement fee to the bank of
approx 1% on acceptance of a loan with a min amount
of approx. 700 Euros and a maximum of 1,500 Euros, valuation
costs if necessary and extra costs to the Notaire for
the registration of the mortgage at the "bureau
des hypotheques".
The maximum amount that can be borrowed in France on
a property aged over 5 years for non residents is 85%
of the purchase price, with a minimum loan of 75,000
euros not including Notaires fees or Estate Agents fees.
If you are going to be resident and working in France
90% is possible. New properties are treated differently,
in that if they are under 5 years of age, the purchase
price should include VAT (TVA). It can be possible to
borrow up to 90% of the purchase price EX VAT. The normal
minimum loans available are now 50,000 euros.
Interest rates, terms; fees and lending criteria change
in France due to changes in the Banque de France base
rate on a frequent basis and it is sensible to ask for
specialist advice
