Finance in France: Mortgage checklist

When applying for a mortgage from a French lender there are some key questions that you need to answer.

What is my time frame?

If you have already found the property that you would like to buy, you have probably already signed a compromis de vente and paid a holding deposit to avoid the property being snapped up by somebody else. In this case, it is important that you waste no time in applying for a mortgage, as there will most probably be a date for completion included in the contract – typically about three months later.

The contract normally also indicates that a mortgage application must be made within a certain time frame (normally two to four weeks from initial signature). It is wise to keep to this time frame, not only to keep to the conditions of your contract, but also to allow enough time for the mortgage to be arranged before completion.

As long as a complete mortgage application is submitted, it should only take the lender a week at the most to give their initial approval (this length should be increased for applications for large amounts that often have to be approved by more than one panel) and a further week to arrange for the surveyor to carry out and submit their valuation, during which time your life insurance application can be analysed by the life insurance company.

The time frame for both the valuation and life insurance analysis to be carried out can vary, however, and may take longer than a week depending on how easy it is for the surveyor to set up a date with the vendor to view the property and whether there are any medical conditions that need to be considered by the life insurance company. Once the valuation and the life insurance results have come back, the lender can draw up and send their offer, allowing borrowers to secure a mortgage offer, in theory, approximately three weeks after submitting their application.

In France, mortgage offer letters have to be signed and returned to the lender for the mortgage to be arranged and funds released. Under French consumer protection law, borrowers must not accept the offer (by signing and returning it to the lender) until an 11-day reflection period has expired, allowing them to digest the information. Once the lender receives the consumer’s acceptance, along with the request from the notaire for the mortgage funds to be sent, they typically take a further five days to process this.

However, borrowers should allow for an extra two weeks, if not a month, for any complications that might arise, such as requests from the life insurance company for additional information or medical tests to be carried out, or any delays resulting from bank holidays and Easter breaks – when everything in France shuts down.

How much will I be able to borrow?

The choice of property open to you will be influenced by your deposit and the amount you are able to borrow. Therefore, it is advisable to establish how much lenders will be happy to lend prior to selecting a property.

French lenders will consider your current expenditure on debt servicing in relation to your current income before offering a mortgage. If expenditure on existing loans and mortgages is already high, compared to the income received from employment, self employment, rental property, investments and pensions, the lender will be unwilling to offer a large mortgage amount.

An overseas mortgage broker can calculate how much you would be offered by a French bank, which can then be added to any funds you are able to raise from UK re-mortgages, along with any savings. This total figure does, of course, have to cover all of the costs of purchasing – taxes, land registry, mortgage registry, mortgage arrangement etc.

However, given the vast number of lenders that now offer mortgages to non-French residents, the market has become very competitive, which has led to ever-increasing maximum permitted loan to value (LTV) ratios. It is now possible to find 95%, 100% or even 105% LTV mortgages for those looking to borrow as much as possible. However, it is important to be assessed for your suitability for these products as the lending criteria for this type of mortgage deal is often stricter.

How much can I afford to pay?

It is important that you have an idea of how much the monthly payments will be for the mortgage amount that you intend to borrow. Borrowers who prefer to clear their debts as soon as possible will want to take a capital repayment mortgage, whereby they repay a part of the capital each month, making their monthly payments a bit higher. All French banks have a debt phobia and prefer to lend on this basis, meaning the rates are often more favourable and ultimately that the mortgage will cost less overall.

Borrowers who need to keep their repayments as low as possible may want to consider an interest-only mortgage (whereby none of the capital is repaid), but should make other provisions for the repayment of this capital as a lump sum. The overall costs of these interestonly mortgages, although less on a monthly basis, is greater, as the interest is calculated on a fixed, rather than diminishing, mortgage amount, and the rates are usually higher.

Do I have all of the paperwork?

There is no getting around the fact that the French love their paperwork. In all fairness to French lenders, they do not have access to the systems that UK lenders have in order to check a borrower’s ability to repay their debts (as systems such as Experian and Equifax are forbidden under French data protection law) and, therefore, they rely purely upon the paperwork submitted by the applicant. In addition, it is close to impossible for French lenders to repossess a property, as they must prove in court that they took all the necessary steps to ensure that their borrower could keep up the monthly mortgage payments in the first instance.

In this climate, it is little wonder that lenders scrutinise the last three months’ bank statements and ask for three forms of proof of income before proceeding. Therefore, it is absolutely vital to check that you have access to and can provide all of this paperwork before setting your heart on a property or mortgage in France.

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