How much can I borrow?

A French resident can get a 100% mortgage, an EU foreign resident up to 85%. The major high street banks offer the highest percentage LTV (Loan To Value), the building societies give better interest rates but are currently willing to only give out up to 80% LTV. The banks offer loans up to 25 years but 15 years will see the best interest rate.

What types of loans are there?

The three principal types of loan are fixed rate, variable rate, and interest only. The fixed rate loan is not as popular in France due to the way French banks cap variable rate loans.

The interest rate on a variable rate loan goes up and down with the European inter-banking lending rate called the Euribor. However it will be capped in one of two ways. The first is a +1/-1 mortgage, which means the rate can only go up or down by 1% from the original lending rate no matter how high interest rates soar. Variations can be from +0.5/-0.5 to +2/-1. The second method of capping is that the monthly repayment never changes no matter what the interest rate does, but the length of the loan changes. However the length of the loan can never increase by more than 5 years, effectively capping the rate. With the medium term prospect of interest rates staying low, it is currently the most popular product.

Interest-only loans are readily available even though not popular in France. There are also mixed mortgage types, for instance being interest only for the first few years and then reverting to a standard capital repayment loan. There are no buy-to-let mortgages in France.

What do I need to qualify?

There are no special rules for foreign buyers, the same rules apply as French citizens. The key metric is that your monthly mortgage repayment cannot exceed 1/3 of your net income (after tax, and any other mortgage or debt repayments).

The French banks really like to see pay slips. Having cash-bought property around the world will usually count for nothing. Owning a successful company and taking a minimum salary for tax reasons mean you will only be able to borrow against that minimum salary. We work with many successful entrepreneurs, and if you feel you are in this position then contact us and we can suggest several avenues available.

What are the rates?

When looking at rates, the quoted rate is often the bank margin omitting the Euribor which is currently around 0.5%. Compulsory life insurance must be added, which for a middle-aged person is around 0.4%. In general mortgage rates in France are at an all-time historic low. A variable rate loan can be had starting from 2.15%, August 2013, not including Euribor or insurance. If borrowing for example around 80% over 20 years, around 3.2% would be a good thumb-in-the-air figure to estimate your costs when doing initial research.

What are the hidden costs?

Extra costs are:

  • the arrangement fee, or frais de dossier
  • securing the deeds against the loan, or frais de hypothèque
  • early repayment penalty

Each bank has its own arrangement fee, varying from a capped percentage to a fixed sum, but from our survey it appears to be on average around €600.

The securing the loan costs around 0.6% of the value of the loan, and is added to your “Notaire fees”. The Notaire passes the money directly to the required government departments.

If you decide to repay a lump sum on the loan to lower your monthly repayments, there is an early repayment penalty. It varies from bank to bank, but a typical arrangement will be 3% of the lump sum paid off if within the first 5 years but no penalty afterwards. This is something you can negotiate with the bank.