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French
Mortgage |
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Not all banks have identical procedures and policies in terms of mortgages.
Therefore, the following should be taken as a general guide, with the
understanding that individual banks may vary somewhat from it.
To begin with, one should be aware that there are a number of UK banks now
operating in France, which can provide a French mortgage. In fact, in a number
of ways, these banks are a better choice than taking a mortgage from a French
bank. For details, click on
French Mortgage from UK bank.
In any case, the general procedure is as follows:
- Application. The first step is to complete a mortgage application
form. Your bank will also likely require you to have life assurance, so you
may need to complete a life assurance application as well. The requirements
for a mortgage in France are basically the same as in the UK; the main item
being proof of income (e.g. salary payslips or other proof of income).
- Valuation. In some cases, the bank may require a valuation of the
property prior to offering a mortgage. If the bank requires this, you will
typically be charged a fee to cover the cost of the valuation. Consequently,
when shopping around for a mortgage, check if the valuation is required and
if so what the fee for it is. Note that this valuation is not a full
structural survey, merely a valuation check performed by the bank to
reassure themselves that the value of the property will cover the mortgage
in the event of a default on the mortgage.
- Mortgage Offer. Once the bank agrees to give you a mortgage, they
will send you a mortgage offer (known in French as 'offre
préalable de crédit'). Normally the offer is
good for a minimum of 30 days (you have up to 30 days to accept it).
- Cooling-off. When you receive the written
mortgage offer, you must wait a minimum of 10 days before accepting it. This
is a legal requirement in France, which is intended to protect the buyer
from being hurried or pressured into a mortgage. The idea being that one has
a minimum of 10 days to reflect before committing.
- Acceptance. After the 10-day cooling-off
period, you can accept the mortgage offer. If you decide to accept the
offer, it should be after the cooling-off period but before the offer
expires (offers are normally good for a minimum of 30 days).
After you have accepted the offer, the property purchase
must be completed within a certain period of time (e.g. 4 months), or the offer
is void. Consequently, you should check both the period for which the accepted
offer is valid and ensure that the property purchase is to complete within this
period.
Lending policies in France tend to be a bit different than
the UK:
- French banks tend to require a large deposit than UK
banks. Consequently, while one can get 100% mortgages in the UK, the maximum
in France tends to be 80%. If you require more than 80%, you may need to
shop around.
- Traditionally, French banks are a bit more
conservative about the multiples of income they will lend.
- French interest rates are of course tied to the local
Euro interest rate, which fortunately is often less than the UK interest
rates.
- You need to carefully check what fees will be charged
in addition to the interest and repayment elements of the mortgage. For
example, you may be charged an arrangement fee, a property valuation fee,
and a notaire mortgage registration fee. These fees may be higher or lower
than equivalent fees in the UK, so should be carefully checked when
comparing the offers of different banks.
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Pre-Approval |
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If you are looking to buy a house in France, but have not
yet found a property, you may wish to apply for a mortgage. Although the bank
will not (in most cases) provide a firm offer until they known which property is
being mortgaged, they may provide 'Approval in Principle'. This means that they
have looked at your income and other considerations and are willing to give you
a mortgage, subject to the property to be mortgaged being sound.
There are several advantages to this approach. To begin
with, you get most of the application sorted in advance, so once you have
decided on a property it is quite quick to get final approval. More importantly,
it puts you in a better negotiating position with the buyer and may allow you to
get a slightly better price. This is due to the fact that given the choice
between a buyer who still needs to get a mortgage approval and one that already
has an approved mortgage, most buyers will prefer the latter (sometimes even if
the offer price is a bit less). This is particularly true in France, due to an
important part of the property purchase contract (see below).
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Important
Condition ! |
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Part of the standard property purchase contract (compromis de vente)
is the condition that the purchase is conditional upon a mortgage being secured.
In other words, when you sign the contract to purchase the property, if you are
unable to secure a mortgage, you do not have to buy the property.
This is an extremely important condition. Without this condition, if you are
unable to obtain a mortgage and consequently unable to buy the house, you lose
your deposit. With this condition, if you are unable to obtain a mortgage, you
are no longer bound by the contract (unless you still wish to proceed) and can
therefore cancel the purchase and have your deposit returned.
On occasion, a buyer may propose a contract which has this clause removed. It
would be inadvisable to sign such a contract unless one does not require a
mortgage or unless one has already has a mortgage agreed.
One important item to be aware of is that if you cancel the property purchase
on the basis that you haven't been able to secure a mortgage, you are legally
required to have made reasonable efforts to obtain a mortgage. This includes
making an application in a timely manner (e.g. within a month of signing the
compromis de vente). If you fail to meet these conditions, the buyer is not
required to refund your deposit.
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Life
Assurance |
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Many banks will require you to have life assurance. The reason they give for
this is that, in the event of your death, repayment of the mortgage is
guaranteed by the life assurance. As the cost of this insurance can vary, it is
worth checking your options to ensure that you get the best deal.
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