French mortgages for non residents (A guide)
In this brief guide, we are going to discuss French mortgages for non-residents.
Getting a French mortgage for a non resident is quite common. France is a beautiful country with many beautiful villages, a lovely array of food and so much history. It is natural that many non-residents will look at France as a place to buy a second home or holiday home.
The French weather is a bit better than the weather in the UK, its currency is the Euro and the language isn’t so hard to learn.
In this brief guide, we’ll discuss the main points you may be thinking about when considering a French mortgage as a non-resident.
If you are considering buying a property in france then the first thing to take note of is that you will need a French mortgage to do so. You will struggle to find any Uk mortgage lenders who are willing to offer you a mortgage on a property in france. If you do then the rates may not be so competitive and you may have been better off getting a French mortgage.
Fench mortgages for non-residents
A non resident is anyone who doesn’t live in the particular country. If you intend to use your home as a holiday home or a second home which you spend a few months out of the year in then you are likely going to be characterized as a non resident. This means you won’t be able to get a typical mortgage as French resident but rather a French mortgage for non-residents. Some French banks will offer you a mortgage as a non resident but you will find that these mortgages are quite different to what a French resident may be offered.
You don’t have to get a French mortgage as a Uk resident, there are some Uk mortgage lenders who will offer you a mortgage but this mortgage may not be very competitive as the market will only have a few mortgage lenders. Alternatively you could purchase a French home by simply using your savings, selling your UK home or remortgaging your UK home.
The option of whether to choose a French mortgage or a UK mortgage for your French home will depend on a lot of factors but in the end the cost may be the determining factor.
Using a Uk mortgage
There are some mortgage lenders in the Uk mortgage market who specialise in overseas mortgages.
Using a mortgage rather than getting a French mortgage as a non resident is one of the options you have. A Uk mortgage may be hard to find and your best way to find one is by using a specialist mortgage broker who will be able to help you find a mortgage to fund your French property purchase.
As mentioned before a Uk mortgage will likely cost more as the market will be non-competitive due to very few mortgage lenders offering these products.
A Uk bank may also be willing to offer you a mortgage to purchase a property in France as they will have your credit history and as the mortgage lender is from the UK, you will have a complaints and compensation framework should anything go wrong. These are not things which you can guarantee if you get a French mortgage for non-residents from a French Bank.
How to get a UK mortgage for a French property
When getting a UK mortgage for your French property you should know that most Uk mortgage lenders will require a mortgage deposit of at least 10% but may require mortgage deposits of up to 30%.
You will also have to pay mortgage fees, solicitor fees and a fee to your notary. You will also have to pay fees to the local authorities in France as well as other fees and taxes which can account from between 10% to 15% of the property sale price.
Steps to get a Uk mortgage for a French property
To get a mortgage for a French property you can first find a mortgage broker. This could be a specialist mortgage broker or an overseas mortgage broker.
Your mortgage broker will then find an appropriate UK mortgage lender who is willing to lend to you based on your mortgage affordability.
The UK mortgage lender will then ask you for certain documents which they will use to provide you with a mortgage in principle. This will let you know how much the mortgage lender is willing to lend to you.
In some cases, the mortgage lender will require you to pay a holding fee so the mortgage rate you choose is locked in for you.
You should then go on and complete the purchase of the home.
Most Uk mortgage lenders will require the below documents from you.
Your P60 tax return
Your bank statements
Proof of a mortgage deposit.
Some UK mortgage lenders may insist you carry out a property survey before they will complete on the mortgage.
There may also be mortgage fees.
Using a mortgage from a French bank
Getting a French mortgage for non-residents is the second option you have when looking to buy a French property as a Uk resident.
French mortgages are likely to be more competitive than the UK mortgages which are available to you and the French mortgages are known to have low APRs and very flexible fixed terms which means you can lock in your mortgage rate for a suitable time.
Having a fixed-rate mortgage could be very good for you especially if you earn your money in pounds and pay your mortgage in Euro. This means that any economical factors which change the exchange rates or cause the French market to take a dip and cause mortgage rates in France to rise will not affect you as much as it could potentially do if you were on a variable rate French mortgage.
Of course, the only issue with getting a French mortgage for non-residents is that you cant control the effects of the exchange rates on the amount you pay for your mortgage.
If you are paid in pounds then you will benefit from the Uk pound being much stronger than the Euro and not the other way around.
When looking to bet a French mortgage you should consider the costs involved before making your final decision.
What guides the French mortgage rate?
The French mortgage rates are linked to the Euribor rate (Euro Interbank Offered Rate). If your French mortgage is a tracker mortgage then your interest rate will essentially follow the Euribor rate. So if the Euribor rate goes down or up your French mortgage rate will follow. You can also access fixed-rate mortgages with your French mortgage.
How to get a French mortgage for non-residents
If you want to get a french mortgage for non-residents then there are a few things you should know.
Most French mortgages will offer you a loan to value of 80%. Most French mortgage lenders will have very strict mortgage affordability requirements which will also take into consideration your debt as a percentage of your annual income. If your debts are too high or your annual income is not reliable then you may find it hard to get a French mortgage.
Most mortgage lenders will also insist that your total annual mortgage payments do not go beyond 33% of your annual income. If you are self-employed or your income is not reliable then you may find that this requirement is much higher.
Steps to get a French mortgage for non-residents
Below are some of the steps you may want to follow when looking to get a french mortgage for non-residents:
You may want to find a local French mortgage broker
Your French mortgage broker will then advise you on which mortgage lenders in France maybe suited towards you
You will then go on to request a pre-approval certificate from the french mortgage lender. This is very similar to the mortgage or agreement in principle in the UK. It shows you how much the french mortgage lender is willing to lend to you.
You will then go on to find a property which you want to buy complete the sale documents and then complete on the mortgage. A French mortgage lender will not complete on the mortgage until the sale of the property has been agreed.
The mortgage lender will require you to conduct a property survey on the property and then ask you to pay the mortgage fees and costs which were mentioned in the mortgage offer.
Most French mortgage lenders will request the below documents:
Your Uk tax returns
Your P60 payslips
Your bank statements from your UK bank account and French bank if you have one
The property sale documents
Your mortgage deposit (usually around 20%)
Tax considerations for your French mortgage
If you are getting a French mortgage then you should take into consideration the tax considerations and tax deductions.
When you buy a house in France there are two main taxes which you should be aware of. They are called the taxe d’habitation and the tax foncière.
These taxes are set by the local region and you need to check to see what these taxes will cost you on the property you want to buy.
When selling your home there may also be tax considerations which you need to take into account. This could be capital gains tax in the Uk and in France and any other local charges in France such as social charge which is usually 11%.
If your French property is also an income-generating property then you may also be liable for income tax in France.
Seeking legal and financial advice before you buy a property in France is a good idea to ensure you understand the current and potential future liabilities you may face.
When you have a property in France then you should know that the inheritance laws in France are quite different from those in England. Your kids will have a right to inherit a certain proportion of your estate but a surviving spouse will have fewer privileges than are present in the UK.
Regardless of your reasons for getting a property in France seeking expert guidance to ensure you are fully aware of your responsibilities and any liability is very important.
French mortgages for non-residents (FAQs)
Can a foreigner get a mortgage in France?
Yes, foreigners can get mortgages in France but as with all mortgage lenders, you will need to meet their mortgage affordability requirements. You should look to see what your tax liabilities maybe when getting a French mortgage as a foreigner.
Can I get a UK mortgage for a French property?
Yes, you can get a UK mortgage for a French property. There are some Uk mortgage lenders who will provide you with a mortgage t buy a French property, the alternative to this is getting a French mortgage for non-residents.
Uk mortgage lenders who provide French mortgages are not very competitive so you should ensure you compare your options before choosing a mortgage for your French property.
Most UK mortgage lenders are not keen to lend on a French property due to difficulties they usually have with securing the loan.
The Uk mortgage lenders willing to lend to you could be found by using an overseas mortgage broker or a specialist mortgage broker but don’t expect to get good mortgage rates.
How much deposit do I need for a French mortgage?
When getting a French mortgage you will usually need a minimum mortgage deposit of between 15% to 25% in order for you to be able to purchase the property. You can get a french mortgage with a fixed rate, a discount rate or a variable tracker rate.
Can I get a mortgage to buy in France?
Yes, you can get a mortgage to buy in France from either a UK mortgage lender (although much more difficult) or a French mortgage lender.
Can foreigners own property in France?
Yes, foreigners can own property in France. There s no restriction on property ownership in France. Getting a mortgage in France as a foreigner may, of course, be much more difficult than you anticipate.
In some cases, foreigners may find that property sellers in France inflate the prices when dealing with foreigners due to the risk involved with the sale not going through.
How much can I borrow for a French mortgage?
For a French mortgage you will usually be able to borrow no more than 33% of your gross income. You can use a french mortgage calculator to see what this looks like.
Can you get an interest only mortgage in France?
Getting an Interest only mortgage in France will be very difficult as these kinds of mortgages are less common in France due to their perceived risk. Any French mortgage lender willing to offer you an interest only mortgage will likely offer you a maximum loan to value of 75%.
Do French banks do credit checks?
Yes, as with the UK, French banks will do a credit check on your before they arrange a mortgage for you. If you are a non-resident then this mortgage check will likely be for data in your domiciled country.
What tax do you pay when buying a property in France?
When buying a property in France you would have to pay VAT at 20% on the purchase price and stamp duty at the rate of 0.7%. The sale of new property under five years old between private individuals is not subject to any French VAT, although the usual stamp duty of 5.80%/5.09% is payable.
What are the property taxes in France?
When you buy a property in France there are some property taxes which you should be aware of, these include:
This is an annual tax which you need to pay if you occupy a property in France from the first day of the tax year ( which is January 1st). You will have to pay this tax even if the property is empty but habitable. This tax bill will usually be sent to you house address in the last quarter of the year, it will specify when the tax is due and if you fail to make this payment then you will be fined.
This tax is slowly being removed.
The Taxe d’habitation also includes the TV licence payment. And if your property is a holiday home and is located in an area of housing shortage then you will have to pay more tax.
This tax is paid by the property owner. In some cases, a proportion of the tax could be attributed to the property seller in the year of sale. This tax bill will usually be sent n the last quarter of the year and if you fail to make the payment on time then you may be fined.
In some areas taxe d’enlèvement des ordures ménagères (TEOM), a tax for house refuse collection, may be applied.
Things you need to consider when getting a French mortgage:
Below is a summary of things you may need to consider when getting a French mortgage.
- You may not need to remortgage your UK home as most French mortgage lenders are now willing to offer mortgages to non-residents. This means you also don’t have to rely on a UK mortgage lender for you to be able to get a mortgage as a non-resident in France.
- Using a French mortgage broker in France may be the best way for you to secure a French mortgage as they could compare the different mortgage options you have. Using aa UK mortgage broker may also be worthwhile due to the regulatory protection you get.
- You will be able to apply for your french mortgage online and there will be support staff who speak English who are able and ready to help you.
- Getting a French mortgage rate is often way cheaper than getting an international mortgage from a UK mortgage lender. This is due to the fact the UK mortgage market for French mortgages is very limited and not as competitive as the mortgage market for non-residents is in France.
- Most French mortgage lenders offer French mortgages for non-residents but there may be a few French mortgage lenders which offer specialist mortgages for non-residents and this could be more suited to you.
- If you are paying for your mortgage in Euros but earn your income in another currency such as the pound then you need to seriously consider what this could mean for you in case there is any drastic change in the exchange rates.
- The French mortgage market is heavily regulated ( maybe not as much as the UK) but if you feel the mortgage lender has acted in any way which is not right or fair then you can report them to the regulatory body for appropriate recourse.
- If you miss your mortgage payments or default on your mortgage payments then the french mortgage lenders would work with you to resume your mortgage repayments. If you feel this hasn’t been the case then you can also report them to the regulatory body to get appropriate recourse.
- If you live in France and are considered a resident then you may be able to access regulated and in some cases, subsidized mortgages which may be useful if you are a first-time buyer or child of an ex-pat.
- The fees for getting a French mortgage are not significant, so when dealing with a French mortgage broker do not try and negotiate these fees as it could be seen as rude.
- All french mortgage lenders are required by law to provide you with the annual percentage rate (APR) of the mortgage. This will allow you to accurately compare the mortgage offer you have received with other French mortgage options.
- When you are buying a property the seller can provide you with a copy of the most recent tax demand, called avis d’imposition de taxe d’habitation.
- The French post office recently launched in the French mortgage market and they offer mortgages are very good rates as they are trying to get a foot in the mortgage market. You should check them out as your first point of call. They are a bit old school and too much paperwork and red tape may make the experience with getting a mortgage with them, a nightmare. If they have cheap rates then you may be willing to go through this.
- Every French mortgage lender must offer mortgage insurance protection and this does not raise the cost of the mortgage.
- As mentioned before you will usually not be offered a French mortgage without first agreed on a sales or purchase contract but you may be able to get a pre-approval mortgage certificate, which may help you when you are negotiating the property price.
- Not having a French bank account won’t hurt you but opening one and making regular deposits could go a long way to making your French mortgage application go swiftly.
- The French mortgage application process for non-residents could take a considerable amount of time and the amounts of documents that may be requested from you could be a lot. Working with a French mortgage broker or an overseas mortgage broker who has some experience of dealing with French mortgage lenders may help you prepare the documents needed well in advance.
- You can get a fixed, variable or discounted mortgage but the fixed mortgages will usually come with an early repayment charge.
- As with any introductory mortgage, the mortgage rates will usually go up after the introductory term is over so be sure to check the terms and conditions when signing up for an introductory rate French mortgage.
- You will usually not be able to get a mortgage for more than 33% of your gross income. This is because monthly mortgage repayments cannot be more than 33% of your monthly gross income.
- Most French mortgage lenders will only offer you a maximum of 80% for the loan to value.
- French mortgages have “guarantees”. You should ask your french mortgage broker about this. There are fees payable for each guarantee level. You can either have an institutional guarantee rather than a conventional mortgage charge.
- Equity release products are rare in France and the requirements for the ones which exist are pretty high.
- You can release the equity in your French property if you have a mortgage or not.
- Bridging mortgages up to two years are available in France
- Buy to let mortgages are not really available in France
- Interest-only mortgages although not very common in France gave grown in popularity. The three different types of French mortgages you could get include: Assurance vie (life assurance) linked: with this mortgage you don’t put any mortgage deposit down and instead take a 100% interest-only mortgage. You will then have to place your mortgage deposit into a French investment scheme which will run alongside the mortgage. These investment schemes are very good when considering inheritance liabilities, they can also be a very good option if you plan to buy lots of properties as they can be used in place of a mortgage deposit. Dual-phase: Some French mortgage lenders offer an interest-only mortgage repayment for the first few years and this converts to a capital repayment mortgage. This could be a good option if you foresee paying a lot more in the first few years. Asset-backed: this is an interest-only product which does not require a deposit into an investment scheme and does not have a second repayment phase. You simply need to provide evidence of your other net assets up to a value of between 120% and 150% of the loan amount.
In this brief guide, we discussed french mortgages for non-residents. If you have any questions or comments then please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.