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 lenders choose to use the EURIBOR 1 month index, the EURIBOR 3 month index or the EURIBOR 12 month. Typically the EURIBOR 1 month index is the lowest base rate, the EURIBOR 3 month is a mid range base rate and the EURIBOR 12 month is the most expensive base rate.

For example, over the last 8 years, since the Euro was introduced and the EURIBOR became the base rate for all Eurozone countries, the average EURIBOR 1 month index is 3.18% whereas the average EURIBOR 12 month index is 3.4%. For more on the trends of the EURIBOR rates, please consult our EURIBOR page.

(For more information on the EURIBOR please consult our EURIBOR information 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 lenders 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 Advisor will ensure that you bear in mind the cost of the mortgage once this introductory period expires.

There are both short term and long term fixed rate deals also available from certain lenders in France.

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, 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.
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 will be free to repay without penalty.

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 made the mistake of applying 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.

Some banks claim that they have interest-only deals when, in reality, these products do not correspond to the English concept of “interest-only”. These deals require the borrower to deposit some funds with the lender in a secure, guaranteed investment that will be used to repay the mortgage at the end of the term. However, the return on these investments can be low and is not always sufficient to repay the mortgage and, in this case, the lender will ask the borrower to top up the investment or to repay some of the capital before the end of the term.

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 exchange rate whilst on an interest-only basis. For more information on these products please call us.

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 Advisor will be able to tell you more about these deals and some of them feature on our Mortgage Deal of the Month page.

WHAT COSTS ARE INVOLVED?

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. The costs for arranging the mortgage in France are however distinctly good value.

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 as VAT is applied to the purchase instead and is incorporated in the purchase price).  

In addition to these costs, there is also a cost of registering the mortgage taken with the Bureau des Hypotheques – the mortgage registry office 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.
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.

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 750€. We have also created a number of mortgage deals, exclusively for Assetz Finance clients, that include NO arrangement fee at all.

Please think carefully before securing any debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.

When securing a debt against your foreign property please remember that:

a) your foreign property may be repossessed if you do not keep up repayments on any mortgage or loan secured on it.

b) changes in the exchange rate may increase the sterling equivalent of your debt if taken in another currency.
For all mortgages and loans, irrespective of their location, please be sure that you can afford the repayments before entering into any credit agreement.

The figures and information quoted on this site are believed to be correct at the time of issue and are subject to change without notice. Any quotation supplied is NOT an offer of a mortgage.

In accordance with the Data Protection Act 1998 all personal data handled by Assetz Finance will be processed fairly, lawfully and in the best interests of our client. The information and personal details provided may be disclosed to companies who have an agreed partnership with Assetz Finance and who will be able to offer you financial and property services that you require.  These companies may be located in your country of purchase or the UK.

Please be aware that it is a criminal offence to give misleading or incorrect information in connection with a loan application. Specific actions may be taken to prevent fraud.
When securing a debt against your foreign property please remember that:

a) your foreign property may be repossessed if you do not keep up repayments on any mortgage or loan secured on it.

b) changes in the exchange rate may increase the sterling equivalent of your debt if taken in another currency.
For all mortgages and loans, irrespective of their location, please be sure that you can afford the

Call our French Mortgage Team now on 0845 400 8000 or 0161 482 7593 to find out which service or services would benefit you most.