How to find property in France
The first step to finding a home in France is to consider which area best suits your budget and inclinations.
Financing a home in France can be done in a number of ways. Some purchases are made for cash, particularly when buying properties for renovation; some purchasers fund their acquisition by remortgaging their principal residence and using the funds freed up to pay for a French holiday home, or even sell up in order to move. But there is nothing to stop a foreign purchaser borrowing from a French bank, and increasing numbers of them are now using French mortgages.
Because France is a popular destination for second home buyers, French banks are used to lending to non-residents and many of them will have a well-oiled process for foreign purchasers. Mortgages are available up to 80% of the property value, though some banks may offer less good terms to non-residents, limiting loan-to-value to 50%.
French lenders can be more rigorous about assessing affordability ratios than, say, US or UK banks. Generally, they limit all mortgage debt (including any already owed on a principal residence) to 40% of income, and the process can involve a fair amount of paperwork in order to prove your income and outgoings.
The most common type of mortgage in France is the long-term, fixed-rate loan. This is one of the cheapest mortgage markets in the EU - currently, a fixed 20 year loan can be secured for just over 2%. Choosing a shorter term for the mortgage would bring the rate down further. There is one downside to this type of loan, in that the penalties for early repayment tend to be quite high, which is why some buyers choose a capped rate/variable loan instead.
Variable rate mortgages are also available. Rather than adjusting the monthly payment upwards if the interest rate changes, French banks simply extend the length of the loan. This has the advantage that you know what your monthly outgoings will be, and if interest rates go up, you'll still be able to afford your payments.
|Do I need credit history to get a loan?|
|You do not need a credit history to get a loan in France. However, you will need to be able to furnish the bank with your last three payslips and bank statements as evidence of your income and funds available.|
|Who is the broker? Do we need to use broker’s services?|
|Most French people don't use mortgage brokers. However, foreign buyers may have difficulty searching for the best deal, and many banks are not used to dealing with non-resident buyers. A broker can help ensure not just that you find the right mortgage, but that you are 'steered' through the bank system the right way to achieve a positive result.|
Mortgages are complex products and can't just be bought on the headline rate; penalties for early repayment, special discounts, and any requirements for life insurance to be added, all have to be taken into consideration in assessing the best deal. Many foreign purchasers prefer to choose a mortgage broker rather than approaching a financial institution directly, particularly where they don't have an existing relationship with a French bank.
By the way, in contrast to the way things are done in most other countries, in France the purchase contract (compromis de vente) has to be signed before the mortgage can be granted - and not the other way around.