French Mortgage Product Guide - What to Expect

There is an excellent range of both capital repayment and interest-only mortgages available to non-French residents who are purchasing holiday homes, investment properties or even their first homes in France.

Below, we explain how residential mortgage products generally work in France. We have created some mortgage packages with our lenders that enable finance that is ‘outside of the norm’.

If you already own property in France, such as a holiday home or investment property, and wish to re-mortgage or release equity from this property, please see our Residential Re-mortgage page.

If you are purchasing or need to re-mortgage/release equity from a commercial property in France (a B+B, shop, restaurant, café …).

What types of rates are available?

Tracker rates

The majority of French finance solutions are based on a variable interest rate. Variable interest rate mortgages in France work much like tracker mortgages in the UK. The interest rate will be calculated by adding a fixed margin to the base rate used by the lender. The lender has a choice of base rates that they can use and they are all linked to the European Central Bank’s rate of lending. Most French lenders choose to use the EURIBOR 1, 3 or 12 month index.

Typically, the Euribor 12 months will be dearer than the 6 months which, in turn, is more expensive than the 3 months. This is simply due to the added security brought when the rate is not reviewed as often.
To see the EURIBOR rates, please consult our EURIBOR page.

Most lenders will offer a fixed interest rate for the first 3-12 months of the mortgage before the above method of calculating the rate is applied. These rates are often used to attract borrowers onto mortgage products that, after this attractive introductory rate phase, will be calculated on high rates of interest as the lender's margin above EURIBOR base rate is high. It is therefore very important to consider the margin and the base rate that will be used after this introductory rate. Your French Mortgage Adviser will ensure that you bear in mind the cost of the mortgage once this introductory period expires.

Long term fixed rate

Fixed interest rate mortgages have typically been offered in France on a long term basis. The interest rate would be fixed for the entire term of the mortgage, usually up to 20 or 25 years. This allows borrowers to pay exactly the same mortgage payment to the lender each month and therefore allows for easy budgeting.

As the rate is fixed for the entire term, there will almost always be early repayment penalties applied for any overpayments throughout the whole mortgage term.  However, we have created a long term fixed rate mortgage product, exclusively for Assetz Finance clients, which allows partial or full repayment of the mortgage at any point during the term without any penalties at all.  Please call us for more information on this exclusive deal.

Short term fixed rate

Certain French lenders are also able to offer short term fixed rate deals that follow a similar style to the short term fixed rate deals that are commonly taken in the UK. The rate is fixed for a period of  2, 3, 5, 7 or sometimes 10 years, whilst the whole mortgage term is actually 20 or 25 years. The lender will normally apply penalties for either partial or full repayment of the mortgage during the fixed rate period. After the fixed rate period, the borrower would then be free to repay without penalty. Please check the exact conditions of each mortgage products with your finance consultant.

Capital repayment or interest-only?

Capital repayment mortgage deals are most common in France although interest-only mortgages are now available on holiday home and investment purchases. They are less widely available on first homes where the mortgage product offered tends to be capital repayment.

Interest-only products are less prevalent than their capital repayment counterparts in France as they were only introduced to the market a few years ago. Some lenders do not have any interest-only products at all. We will steer you towards the lenders that offer interest-only deals if this is your requirement. If you have already applied to a bank directly and have only just found out that they do not have an interest-only product on offer, you will be able to use our Mortgage Salvage Service to ensure that your application is processed and accepted quickly by one of the lenders offering interest-only mortgages.

Most interest-only products offered by French lenders tend to be split in two phases: the interest-only phase (which can last up to 10-15 years) and the capital repayment phase (for the remaining term). That way, French lenders have the reassurance that the capital will be paid off by the end of the mortgage.
There are a couple of lenders that offer interest-only deals as we know them. If you have decided that you will require an English-style interest-only mortgage for your purchase or re-mortgage, you will need to make sure that one of these specific banks is used.

Interest rates for interest-only packages can often be higher than the rates offered on capital repayment mortgages. However, we have created a range of interest-only options, available exclusively to Assetz Finance clients, which allow borrowers to benefit from an excellent interest rate whilst on an interest-only basis. For more information on these products please call us on 0845 400 8000.

How much can I borrow?

Over the years, French lenders have increased the amount that they will offer to non residents from 70% to 100%. Most banks prefer to offer up to 80% of the purchase price. However, Assetz Finance has created a number of high loan to value (LTV) mortgage deals exclusively for our clients, to allow borrowers to access the French market with the smallest deposit possible.

Your French mortgage adviser will be able to tell you more about these deals. Call them now to find out more on 0845 400 8000.

What costs are involved?

Legal fees - property related

In France, the legal costs and taxes that must be paid by purchasers of property are distinctly higher than the equivalent costs for purchasing property in the UK.
For the purchase of property that is over 5 years old, all of the purchase costs (including the French equivalent of stamp duty, land registry, legal fees and so on) usually amount to approximately 7% of the purchase price. This is reduced to approximately 3.5% for the purchase of property that is less than 5 years old or off-plan (as the amount of stamp duty is reduced significantly and there are far less searches to carry out).  

Legal fees - mortgage related

In addition to these costs, there is also a cost of registering the mortgage taken with the Bureau des Hypothèques - the mortgage section of the land registry in France - which is obligatory. The notaire, who oversees your purchase, will pay this for you and will add it to his bill to you. It is typically 1.5% of the mortgage amount but will depend on the type of charge that the lender wishes to secure on your property (again dependent on the age and use of the property).
Whereas UK lenders charge both an arrangement fee AND a valuation fee from their applicants, French lenders only charge an arrangement fee. Valuations are carried out by the majority of lenders at their own charge - you do not have to pay for this.

Lender’s arrangement fee

The mortgage arrangement fee that is charged by French lenders is typically 1% of the mortgage amount taken. However, Assetz Finance has negotiated this fee for our clients with most of the lenders we work with, so that the average fee paid by Assetz Finance clients is currently 900€. We have also created a number of mortgage deals, exclusively for Assetz Finance clients, which include NO arrangement fee at all.

To speak with a member of the Assetz Finance team, please call 0845 400 8000 or 0161 482 7758

Links

French Mortgage Application Form

Cash Raising and Re-mortgages
French Mortgage Guide

Euribor Rates
Why Take a Foreign Mortgage?

Overseas Mortgages

Guide to Investing Abroad

Read our guides to buying and financing foreign property for more insider tips in our members area.

Call Back Request

Can’t find what you are looking for? Or want to chat through your options with an experienced mortgage adviser? Then let us know what time and day is best and we will call you.

Currency Exchange

As soon as you start looking at property abroad you should open an Assetz Currency Service Account. There is no cost associated with opening an account, and no obligation. It simply ensures that you are ready to act quickly when the need arises, taking advantage of the favourable exchange rates available via the Assetz Currency Service.

Deal of the Day

Look out for Deals of the Day, often unique to Assetz Finance, these deals could save you thousands of pounds. It is important to get the right deal for your circumstances whether for your home, holiday home or investment property mortgage or for your home insurance or life policy. The Deal of the Day could be just that. Speak to one of our Advisers to see which deals are the best for you.

Members’ Area

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