France appeals to second-home buyers, people searching for a vacation property, and savvy investors for many reasons, from the climate and lifestyle to the culinary scene. On top of that, they offer the French Talent Passport (FTP) scheme (sometimes referred to as the French Golden Visa), allowing foreigners to gain long-term residency by “significantly contributing to the country’s economy or culture”.
Before borrowing money for real estate, would-be buyers should be aware of the process, which can be more complicated if you’re a foreigner. Additionally, the Government tightened restrictions across the board in January 2022. With that in mind, understanding the mortgage landscape is vital.
Below, we explore how to effectively manage getting a mortgage in France as a foreigner, an important element of the purchasing property process for many.
Getting a Mortgage in France: Are There Options for Foreigners?
We dove into purchasing real estate in “Buying Property in France: Expert Guide”; now let’s outline borrowing options for foreigners. In short, it’s possible to obtain a mortgage, but familiarizing yourself with the French mortgage process and requirements is essential.
The amount you can borrow is determined by French legal stipulations – currently, total monthly liabilities (including mortgages and insurance) cannot be greater than 35% of gross monthly household income.
To qualify for a mortgage, buyers must meet and give proof of income requirements.
A deposit must be provided – the figure depends on the mortgage terms. And most French mortgage providers have a minimum they’re willing to lend.
The necessary paperwork can include accountant’s documents/employment contract (depending on whether you’re freelance, a business owner, traditionally employed, etc.), bank statements, current mortgage/rental agreement, marriage license, passport, preliminary sales agreement, proof of residence, and tax returns for “x” number of years.
Foreign buyers also need to open a French bank account. Credit Agricole has a “Britline” service for English speakers, or you can open one directly with a French bank (there are online options, too).
Additionally, you may need to open a French savings account – it depends on the lender in question.
It may be useful to use a mortgage broker who specializes in the French market.
They can talk you through current offers, trends, and the criteria of each bank, ensure you fully grasp the terms of potential deals, and help with paperwork.
In general, there are several structures to consider: fixed, variable rate, interest-only, and capped-rate mortgages, plus bridge loans.
It’s worth noting you may not need a mortgage at all.
Another option is remortgaging the property in your home country, freeing up equity to purchase the French residence outright.
There are factors to consider here too, like mortgage terms, the ability to buy in Euros if you take out a French mortgage, and the fact only French lenders can arrange to borrow against a French dwelling.
Interest Rates, Deposit, and Mortgage Payments
Interest rates on French mortgages depend on a handful of factors such as the borrowing amount, loan-to-value (LTV) rate, structure, duration, property type, and residency status.
Fixed-rate mortgages are a popular choice among homebuyers in France due to their long-term stability and predictability in payments.
French banks will generally lend EU nationals 70-85% of the property’s value (LTV), meaning a 15-30% deposit is required. For non-EU/EFTA nationals, the LTV tends to be 50-75%. In contrast, French citizens and permanent residents may be permitted to borrow up to 100%, under certain conditions.
In some instances, foreigners may be required to deposit an amount covering at least 24 mortgage payments into a French savings account.
Interest-only mortgages are a distinct type of mortgage arrangement where borrowers only pay interest for a set period, after which they must repay the principal.
These mortgages have stricter qualifying criteria in France compared to traditional repayment mortgages, but they can offer potential benefits for investors, including possible tax deductions on mortgage interest against rental income.
Understanding the French Mortgage Market
The French property market stands as one of Europe’s most robust and reliable markets, making it a prime destination for investors and expats alike.
However, in recent years, French banks have tightened lending conditions, particularly for buyers based in the UK.
However, for expats and citizens of other countries, the lending landscape remains relatively unchanged, aside from fluctuations in interest rates. The Tec 10 index, which influences how much the French government pays to borrow money over ten years, hit a historic low of -0.5% in the summer of 2019. As of 2023, it has risen to 2.61%
In terms of the current market, according to Banque de France, “The average interest rate, excluding fees and insurance, on new housing loans (excluding renegotiations) continued to fall in May 2024 to 3.83%, from 3.89% in April.” Moreover, per an August article in The Connexion, French mortgage rates are “heading towards 3%”.
Additional Fees When Taking a Mortgage
There are several fees to consider when taking out a mortgage in France, including the following.
Mortgage arrangement/admin fees
Cost: Approx. 0.5-1% of the loan amount (excluding VAT).
Mortgage Broker
Cost: approximately 1% of the loan amount
Notary Fees
Cost: An additional 1% on the usual amount
A buyer usually pays approximately 2.5% of the property’s value for a new home and 6.5% for one older than five years (excluding VAT).
However, for buyers taking out a French mortgage, the notary fee is about 1% more, meaning between 3.5-7.5%, because the notary puts the bank’s charge in place.
Having a property purchase agreement is typically a prerequisite for securing a mortgage, as it provides assurance to lenders and sellers about the buyer’s serious intentions.
Valuation survey
Cost: approximately €250
This survey is sometimes required by a lender.
Life and Health Insurance
Costs: Vary
As a foreign buyer, you may be required to take out the following.
- Life insurance equaling 120% of the total mortgage (the lender is the beneficiary)
- Health and disability policies to cover the mortgage cost (over 50s may need to have a medical exam)
N.B. These depend on the individual lender.
Taking out a Mortgage in France as a Foreigner
For foreign buyers in France, the mortgage process is typically straightforward but comes with additional paperwork. The vibrant and varied country entices overseas purchasers, but it’s important to understand the intricacies of the local market before diving in.
