French mortgage rates & types
While the particulars of finding a mortgage for French property may vary compared to your home country, the types of mortgages available are relatively standard. These include:
Interest-only mortgages
These mortgages are increasingly popular, and when it comes to seeking a mortgage in France for foreigners, this may be the type that catches your eye. The interest rate is deductible against rental income, meaning so far as French mortgages for non-residents go, this could be the ideal choice if you plan to use your home in the summer and rent it out the rest of the year. Unlike a standard repayment mortgage, at the end of the interest-only term, you will still need to pay off the full balance.
Fixed rate and variable rate
These are the most common mortgage type for primary residences. France offers some very generous fixed rate terms, even 20-year fixed rate mortgages, meaning the amount you pay per month remains the same across a 20-year period. By the end of the mortgage term, your property will be paid off.
As with most mortgages, the rate you pay will be based on the amount you borrow, and the longer your mortgage term, the less you will pay each month i.e. for borrowing £100k, you may pay around 1000 euros per month on a 10 year mortgage, but roughly half of this if you lengthen your term to 20 years. Use a French mortgage calculator to see what your rate of repayment would be on a property you’re currently considering. As mentioned, interest rates are currently low, making it a good time to shop for a mortgage.
French mortgage requirements for non-residents
Non-residents will need to do more admin than a French citizen when trying to buy French property. As the lending bank will need more assurance that you are going to pay back what you owe, you may be required to open a bank account with them and deposit a set amount to show you can make a suitable amount of repayments. Extras like life insurance may also be compulsory to getting a mortgage in France for foreigners. Some documents you may need include:
- Passport
- Proof of income
- Statement of assets
- Bank statements from the past three months
- Further financial documents if you are self-employed
- Invoices from local tradesmen if you intend to renovate
- Rental agreement
You will also need a property purchase agreement to make a mortgage application.
Other specifics can vary from bank to bank, so hiring a local broker is advised to better understand the requirements and to overcome any language or cultural issues. The fees for this, as well as other essentials like legal and admin fees, can cost more than 2% of the overall purchase, so keep this in mind when setting your budget.
How to apply for a French property mortgage
To start the process of applying for a French property mortgage, you should first decide on if you want to live in the property full-time or rent it. As mentioned above, rental properties may benefit from an interest-only mortgage. You will also need the above documents and may face extra admin and fees as a foreign national, but generally, the process itself should not be too different to the process in your home country.
As a non-resident, you may have no choice but to settle for the larger French banks. The plus side is that these banks will no doubt come with far more experience than smaller lenders, though this may narrow down your search for the best deal.
While you need a property purchase agreement to get a mortgage, you can apply for a pre-approval letter, also known as a certificate of commitment, that will outline how much you are likely to be able to borrow. This will cost around 350 euros, and is valid for around three months. With this document, you may be able to negotiate a better price on your chosen property, as the seller will be assured that a lender is willing to back your purchase.
Tax considerations and deductions in France
If you are paying a mortgage for French property, then you should also read up on the tax deductions that you can benefit from. This is mostly concerned with interest-only mortgages. Interest-only French mortgages will allow for your interest rate to be considered a business expense. That means the tax you pay on your rental income will be taken from your income minus your interest payments.
For French property worth more than €1.3m, the wealth tax needs to be considered. This can vary between an extra 0.5% - 1.5% depending on your property’s total worth. If you live in the property as your primary residence, then you can offset 30% of its value.
So, if you are planning to head to France, make sure you have your documents and budget well planned out before you start house hunting.
Be the first to comment!