Issue No. 25

Eligibility: French banks look in detail for
proof of income and the total amount of
household debt. This debt ratio determines
whether they feel your mortgage is
affordable. In the UK the affordability criteria
is generally three times your income.
Consumer protection: The French
mortgage market is heavily regulated.
Buyers are required to pay for mortgage
protection insurance. The UK market,
despite some tightening in recent years, has
lighter regulations.
The French mortgage market is open
to both residents and to nonresidents.
French mortgage lenders have become far
more prepared to offer loans to non-resident
buyers in recent years. Lenders have an
option of taking out a Euro mortgage rather
than a loan in sterling from a UK bank. An
important first step is opening a French
bank account; this will enable you to deposit
and transfer funds regularly.
Proving that you have a stable income is a
key test for French home buyers. Lenders
will not discriminate against you if you are
self-employed but you must supply three
years’ tax returns and your earnings over
that period determines the amount you can
borrow.
Types of French mortgage
In France, the majority of home buyers opt
for a standard capital repayment loan in
where you repay both the capital and the
interest.
Interest only loans are less common and
are mostly taken out by landlords who want
to minimise their outgoings.
rates increase and are generally fixed for
the entire duration of the mortgage.
However, redemption fees can be
expensive. So, if you want to repay early,
remember to take this into consideration.
Borrowing a maximum of 80% of the
property’s value is the norm, though it may
vary up to 85%. How much you can borrow
depends on your financial circumstances
and credit rating.
Equity release isn't common in France but is
possible if you don't have an existing
mortgage on your property. The amount of
household debt must not exceed 33% of
your annual income.
Calculating the cost of your
mortgage
When applying for a mortgage, French
lenders must state the interest rate as an
APR (Annual Percentage Rate) to make
comparisons easy. A number of factors
affect the total cost including: Amount
borrowed, loan duration, type of mortgage
(e.g. capital repayment or interest only)
Interest rate (APR), fees, mortgage
protection insurance and redemption
penalties
Example: Couple buying a French property
for €170,000 with a capital repayment loan.
% € Years
Loan Term 20
Loan to Value 80.00
Interest Rate (APR) 1.80
Property Purchase 170,000
Deposit 34,000
Amount Borrowed 136,000
MONTHLY COST 675
*Important note: this is an example only and
does not represent an offer.
Fixed rate or variable rate? Fixed rate
mortgages offer greater stability if interest