The first step when buying a property in France is to calculate your budget. If you need to borrow funds for your French property purchase, then you should primarily make sure you are eligible to borrow funds in France. Be aware that any French mortgage must be secured against the property itself. It is possible to obtain an Agreement in Principle in France and this is a good weapon to have in your arsenal when bidding against a cash buyer because it gives estate agents confidence you have the finances in place. You also need to take into account fees for Notaires (for legal affairs) and estate agent fees which can make up a significant percentage of the purchase price. Sometimes estate agents fees are rolled up in the purchase price so it is worthwhile double checking this.
Once you have your budget, you can go to France to find your dream property.
When you find a property, you may sign a Compromis de Vente (a sales agreement) and transfer the deposit to secure the property. A signed copy of the sales agreement must be submitted to the lender if you are taking out a mortgage. It is important that you include a “Clause Suspensive” to protect your deposit in the event that you are not able to secure a mortgage.
The lender will then instruct a valuation if necessary.
You will then need to open a French bank account, and arrange buildings and life assurance. You must also decide whether you plan to attend completion at the Notaire’s office. If you are unable to attend, you will need to arrange a Power of Attorney so leave additional time to organise this.
If you are borrowing funds, the lender will issue a mortgage offer, sending a copy to you and your Notaire. Your mortgage offer cannot be returned to the lender until the end of an eleven day ‘cooling off’ period. If you return your offer early, it will be returned to you and the eleven day cooling off period will begin again.
Once you have returned your signed mortgage offer to the lender, the Notaire can request the funds. You will need to ensure you have transferred the balance to the Notaire.
You are then ready for completion and you will become the proud owner of your very own French property.
Essential French mortgage information
French banks do not have access to credit checks on international clients, as buyers in the UK would be used to. In order to assess a client’s affordability, the banks require documentation showing that your outgoings, including your proposed monthly mortgage payments, do not exceed 33% of your income. Existing outgoings would generally include any existing formal financial agreement, such as mortgage payments, loans, credit card payments and child maintenance.
Life assurance and building insurance will be required to have in order to borrow and this can take some time. We would recommend that you allow a minimum of two months from application to the lender to completion.
Mortgages are available on a repayment or interest only basis. The latter is subject to stricter lending criteria. Both types of mortgage can be arranged on a variable, fixed or capped basis. Depending on the lender, there will be a maximum age by which the loan must be repaid, which can be as high as 75.
Mortgages can be obtained for the purchase of new or existing properties, Gites and on Leaseback schemes. For leaseback properties the scheme will need to have approval from the bank and this is more likely to be granted for schemes run by the large reputable management companies, such as Pierre et Vacances, MGM and Odalys.
Renovation and construction loans are available, however estimates will be required at the time of application, and have to be from registered French builders. Once the mortgage has been approved, funds will be released by the lender directly to the builder following submission of invoices. In the case of construction loans, more detailed information on the project will be required.
You can raise capital on your French property. It can also be possible to raise funds on your French property to redeem another mortgage you may have.
Re-mortgaging is not a common thing in France and as a result can be very costly. You will need to pay costs both at the Notaire’s office and with the new lender. It is important that you get the correct mortgage product first time round and check if any penalties will be payable for cancelling the mortgage.