Finance
For Buying Aboard
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.
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.
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