Frequently Asked Questions - 8

• Are leaseback properties acceptable for a mortgage?

  Yes. Please contact us for further information.

• Can I borrow after I have bought the property?

  Yes, although it is preferable for a variety of practical and cost reasons to carry out both transactions simultaneously.

• Can I organise my own mortgage with a French bank?

  If you speak very good French you could simply go to the local bank branch close to your property in France and arrange a loan directly with the bank manager there. But if the most complex financial negotiation you've ever managed in French is ordering a beer and a baguette then you'd be well advised to use a bilingual banking service to arrange your mortgage.

  An alternative is to use a mortgage broker who specialises in French mortgages. A broker will do the legwork of finding the best interest rate on your behalf and, if you're considered a good credit risk, they may even be able to negotiate a better rate than you would get going directly to the bank yourself.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• Can I remortgage my home property?

  Yes. If you decide to remortgage your UK property then your first port of a call should either be your existing lender or a qualified financial consultant.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• Can I see the mortgage deed?

  If the loan and purchase are dealt with simultaneously, there is only one document, not a separate acte de vente (conveyance) and mortgage. The notaire will let you have a certified copy of the document on request.

• Can I take out a French endowment or pension-linked mortgage?

  No. All mortgages in France are straight capital and interest. Endowment or pension-linked mortgages do not exist.

• Do I need a French bank account?

  Yes, if you own a French property. If you live in France, you must also inform the French tax authorities if you have a bank account outside France. Please contact us for further information.

• Do I need a valuation?

  It is quite rare for a French lender to ask for a valuation or have a survey made unless the purchase price is very large, though it is possible that their local expert is consulted.

• Do I need building insurance cover?

  Insurance for fire and other risks to the property is always a condition of granting a mortgage. Most lenders arrange the insurance with a selected insurer or a borrower is entitled to choose from a number of insurers named by the lender. If you want to use another company, you would have to get the lender's approval.

• Do I need life insurance?

  All lenders will insist on life-insurance coverage. Life insurance can be taken out with a French insurer or a recognized foreign insurance company. Your lender may have a block contract with a French life insurer so that they can arrange cover for customers at preferential rates.

• Does the location of the property matter?

  Not usually.

• For how long can I borrow?

  The French like to pay off their mortgage debts as quickly as possible. Consequently, loan terms tend to be restricted to a maximum of 15 years, though some lenders will be willing to extend this to 20 years.

  If you think you may wish to pay your mortgage off early make sure you are aware of any redemption penalty your lender charges as these can be high - ideally you should ask for this to be removed or go for a deal where there is no penalty.

• For how long is a mortgage offer available?

  Most lenders will hold a provisional offer for two or four months, subject to valuation of the property and other checks.

• How do I finance my French property purchase?

  There are a number of options available. With cash, if you are fortunate to have the available resources. You can either borrow in the UK on the security of property you own there (UK mortgage or remortgage), then use the cash to buy a property in France. Similarly, you may have other assets available as security for a UK loan. Alternatively, you can borrow from any of the lending institutions in France on the security of the French property (euro mortgage). Obviously the method you choose must be that which fits your personal circumstances. The points to consider are discussed below.

  There has never been much difficulty for a UK buyer of property in France to obtain a French loan. On the whole, the criteria are the same as in the UK. If you are borrowing in France from a French lender, the Loi Scrivener will usually apply as between you and the lender. There are very stringent consumer protection rules with a basic ten day cooling-off period after the loan offer has been received. Unlikely though it is that your lender will try to break these rules, always let your adviser see the loan offer before accepting it and never postdate an acceptance so that you can go home and the lenders can hold it until the ten day period is up.

  If you decide to remortgage your UK property then it is essential that you seek advice on the most suitable option for your purposes. It would be unpleasant to lose your French property because you could not keep up the mortgage payments, but it would be disastrous to lose your home in the UK because the borrowing or extra borrowing on its security became too much of a burden. On the other hand, many house-owners have untapped equity in their property which could be used towards the purchase of a French property.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• How do I pay my French mortgage payments?

  We recommend that you open a French euro bank account and pay the mortgage by French direct debit. Please contact us for further information.

• How little can I borrow?

  Most lenders have a minimum loan amount, typically FrF 100,000 - 200,000 and some set minimum purchase prices.

• How long does it take to get a mortgage?

  An \"in principle\" decision can be obtained within a few days. An offer of a loan can usually be obtained within 4 weeks.

• How many lenders do you deal with?

  There are literally scores of lenders to choose from. At the moment we deal with Abbey National (France), Crédit Agricole, Banque Woolwich, BNP, Société Générale and Crédit Lyonnais. All offer mortgage packages to the expatriate.

  If you need someone to hold your hand through the application process it may be better to use a UK institution such as Abbey National or Banque Woolwich which cater for the specific needs of expatriates, and often offer customers preferential rates.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• How much can I borrow?

  In contrast to the UK, where the amount you can borrow is based on a multiple of income, in France it is your gross (i.e. pre-tax) disposable income which is taken into account. If you borrow from a French lender, you will not be offered a loan if the total amount of all your monthly payments exceeds 30 per cent of your joint income (this includes existing mortgage payments, rent, maintenance payments and the repayment of the loan you are looking to take out, but not day-to-day living costs such as food and utility bills, Council tax etc. Potential income (e.g. letting the French property) is not normally considered when assessing your mortgage application.

  If you wish to borrow less than FrF 500,000, you must be able to put down a minimum of 20 per cent of the purchase price, and 15 per cent if you wish to borrow more than FrF 500,000).

  Typically, French banks will lend up to 80 per cent of the purchase price of the property. Some banks will lend more, but few will lend more than 85 per cent. Lenders and notaire's fees cannot be covered by a mortgage.

• I also want to invest some money in a foreign bank account. Can you help me?

  Yes. Please contact us.

• If I want to borrow, does being a foreigner/expatriate make a difference?

  No. Most French banks see expatriates as a safe bet. But do not expect to be spoon fed; the banks will lend you money and that is about all.

  If you need someone to hold your hand through the application process it may be better to use a UK institution such as Abbey National or Banque Woolwich which cater for the specific needs of expatriates. These banks will provide you with documentation in English.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• In which currency should I borrow?

  Few of us are financial wizards prepared to gamble on exchange rate fluctuations. It does seem on the face of it undesirable to earn in one currency but be obliged to pay out of those earnings over a period of time in another currency.

  If you borrow in currency A, you pay interest on that loan and make capital repayments at currency A rates. At the time you take out the loan, they can be much lower than those of currency B. For example, if you choose a euro mortgage then your loan will be in the same currency as the property is valued in. This means any currency swing will not leave you in negative equity (i.e. where your property could be worth less than the value of the loan). If the loan interest is at a fixed rate, this may also give you a significant saving.

  On the other hand, if your income is in sterling you will still be subject to currency variations as any weakening of the pound will make your repayments more expensive. For example, what happens if the rates of exchange have moved against you when you have to buy currency B in order to make payments to your lender? All you hoped to have saved is lost in one of a series of exchange variations. Of course, sterling is now linked to a number of other European currencies so that its fluctuations are somewhat limited. However, you can reduce this risk by arranging to be able to switch the currency of your loan every so often but, unless you are a foreign exchange dealer, you risk becoming too ill with worry to get much pleasure out of your French property.

  Should you borrow in a currency which is not that of the country of your lender? The answer must be that, if you feel you wish to borrow in this way, you must take advice from a highly qualified expert. If you follow the advice he gave you and his prophecies were correct so that you made (or did not lose) money, you may clap your hands. If his advice turned out to be wrong and you lost money, do not blame the expert: blame yourself forever having though of taking exchange risks with your property in France.

  As the FAQs on our web site are at pains to point out, every person who lives in one country and buys property in another asks for - and usually gets - just what he deserves if he does not avail himself of the advice which in fact is always at his service. Few aspects of this kind of buying call more loudly for competent advice than the provision of a loan towards a purchase.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• What about administration charges and arrangement fees?

  Administration charges vary from bank to bank. Arrangement fees can be a fixed percentage of the loan, usually 1 per cent or a set fee of about FrF 10,000. If you opt for a variable-rate loan, check to see if the rate is more advantageous if you put down a large deposit on the property. Also ask if there is any flexibility on payments.

• What about borrowing for renovation work?

  It may be possible to include the cost of renovation work in the advance, but this is the exception rather than the rule. You will need to supply copies of detailed estimates from registered French companies which have been accepted by both parties. If you intend to carry out the work yourself it is only possible to finance the cost of materials.

• What about loan terms and conditions?

  Conditions will be laid down by he lender, which the borrower has to undertake to observe. These will in most cases include:

  • keeping the property in good repair
  • not letting all or part of the property without the lender's permission (this means you would need to ask before you have tenants in the basement, for example, or take in lodgers or paying guests).
  • not altering the property without the lender's permission
  • informing the lender of any local authority proposals which would affect the property
  • keeping the property insured
  • not applying for an improvement or other grant without proper permission.

  They may also include:

  • undertaking to carry out certain repairs or improvements within a specified period
  • not taking out any further mortgage without permission.

• What French mortgages are available?

  French mortgages are somewhat more regulated than their UK equivalents and there are strict legal controls on how much people can borrow in order to stop them overstretching themselves.

  All mortgages in France are straight capital and interest. Endowment or pension-linked mortgages do not exist. Borrowers can choose from fixed-rate and variable-rate loans, capped mortgages and interest-only loans linked to an insurance policy or the money markets. Fixed rate mortgages (which in France are available for the entire life of the loan) mean you know exactly how much you will have to pay. The starting interest rate dos tend to be slightly higher than the variable rate equivalent, however.

  In contrast to the UK, where the amount you can borrow is based on a multiple of income, in France it is a percentage of your disposable income which is taken into account. No more than 30 per cent of your (joint) gross monthly income can be committed towards mortgage repayments. This figure is inclusive of any existing mortgages, rent, maintenance and loans outside of France, but not day-to-day living costs. So two people earning exactly the same salary, who would be able to borrow the same amount in the UK, may be able to take out very different amounts under the French system.

  As in the UK, you will have to provide proof of income, such as three to six months' pay-slips, or three years of fully audited accounts backed up by banking records if you are self employed. If you're looking to buy a property for commercial purposes, you will need to provide a detailed business plan.

  It will be a condition of virtually every French loan that you take out insurance with death, sickness and accident cover and against the possibility of your being made redundant during the term of the loan. The premiums are not high and under 50 years of age a medical is usually not required.

  French lenders will usually require a first legal mortgage (hypothèque conventionnelle) on the property you are buying.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• What happens if I have problems with mortgage payments?

  Many lenders offer insurance policies which pay your mortgage payments if you are unable to earn because of illness or unemployment. If you find that you cannot keep up your mortgage payments, do not assume that you will automatically lose the French property. There is much that can be done to help the situation. You should tell the lender as soon as possible and try to work out a way through your problems together. For instance, the lender may agree to extend the term of a mortgage. Or the lender may agree to your paying interest only for a short period, particularly if your problems are likely to be short-lived.

  Do not ignore letters from the lender. Respond promptly by fax and/or registered post with proof of delivery.

  The lender has a number of rights to take possession, sell or let the property, or appoint a receiver. He may also foreclose or apply to the court for an order for sale. Please also note that any French court judgement can be enforced against your property and other assets in the UK.

• What happens if I let out the property?

  If you intend to let out your property you should think about the tax position. You are entitled to tax relief on the interest payments on a French franc mortgage - proportional to the amount of time your property is let - but there is no tax relief in France on remortgages or sterling loans.

• What happens if I pay off the loan early?

  If you think you may wish to pay your mortgage off early make sure you are aware of any redemption penalty your lender charges as these can be high - ideally you should ask for this to be removed or go for a deal where there is no penalty.

• What is a French mortgage?

  A French mortgage (hypothèque) is a first charge on the property you are buying. The legal system and procedure are different from the English system but there is absolutely no need to be afraid on that score provided that you are being properly advised on the effect of French law. In the long run, lenders the world over are the same - if you fail to make repayments, you risk losing your property but otherwise they leave you alone.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• What is the the Loi Scrivener?

  French purchase contracts automatically carry a condition suspensive relating to the availability of a mortgage offer to the intended buyer. This is required by Law 79-596 of 13 July 1979 known as the Loi Scrivener. This law applies to all credit for the purchase of a dwelling or premises to be used for the combination of a business and living accommodation. It does not apply to loans for the purchase of purely commercial or business property. Similarly, a UK borrower who has borrowed from an English bank is not protected by the Loi Scrivener.

• What protection do I have if I take out a French mortgage?

  There are stringent rules about French mortgages for the protection of borrowers.

• When should I start thinking about my financial arrangements?

  Now. If you are seeking to fund your French property purchase by way of a mortgage or other loan, there are literally scores of lenders to choose from. It is always sensible to find out how much you can borrow at an early stage, even before you start looking for a French property. Please contact us for further details.

  Please be careful about going through a French estate agent for a loan. Should the agent recommend a lender, it is wise to question his motives as he may be receiving commission from the recommendation.

  If you are borrowing in France, it is not necessary to have a firm offer of a loan before you sign a purchase contract, as you would normally do in the UK. On the other hand, if you are borrowing in the UK on the security of property in France, the special protection given by the Loi Scrivener does not apply and you should have got an \"in principle\" loan facility tied up before you make the decision to buy.

  As you will have realised from the FAQ's on the buying process, in France you can be pressured to sign a contract within minutes of having seen the property you would like to buy. Therefore the added advantage of making preliminary financial enquiries is twofold: you know what price you can afford; and the French estate agents will treat you more seriously;

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.

• Which lender offers the best deal?

  This will depend on a number of factors such as the percentage of the purchase price you wish to borrow, the term of the loan and whether you are likely to want to pay back part or all of the loan early.

  Companies which have a wide experience of all the factors involved should be consulted and all the facts put before them. The advice you need is not just how much can you borrow but which is the best way to borrow, and that advice is much more skilled than it may seem. This is why the best possible advice from those with the widest lending experience is essential. Please contact us for further information.