Mortgage Process

FRENCH BANKS

Once you have found the property, signed the preliminary contract (with a withdrawal clause –“Condition Suspensive”) and paid the 1-10% deposit, you have 10 days to apply for a loan and generally 40 days to obtain a written offer from the French Mortgage lender.

If you are applying for a Mortgage through a French bank it will be secured by a charge on your French property. This charge (Hypothèque) will need to be registered at the local Land Registry office.

This will incur costs, payable to the Land Registry Office (Bureau des Hypothèques), stipulated in the offer sent by the bank. The Notaire will take this charge on the day of Completion (signature de l’Acte de Vente) and forward payment to the Land Registry Office.

In order for the bank to process the French Mortgage Application, you must provide proof of Income and Expenditures, proof of savings (deposit) and existing assets/liabilities.

In general, French banks will use a % ratio of affordability: expenditures over Income.

Outgoings include existing loans and mortgage payments (if you’re a tenant, the monthly rent).

Regular Expenditures over Net Income must not exceed 35 %, including the new Mortgage payments. A proportion of the Rental Income from the new Purchase is added to your Income and included in the calculation. Exceptions are made on high revenues.

PRE-APPROVAL

Pre-approval indicating the maximum loan amount acceptable can be obtained from the Mortgage Broker or Bank by filling in an application.

Obviously, the offer will be subject to the property you choose, its valuation if required and supporting income/expenditure documentation, acceptance by the insurance company of the mandatory life cover.

If you can provide all this information it will often save valuable time to get a decision. Some banks may ask for extra information before making a decision.

Documents generally needed by French banks for your Mortgage

Applications are :

Copy of all borrowers’ passports / ID
Copy of marriage certificate if applicable
Copy of divorce certificate if applicable
Proof of address (utility bill, council tax…)
Information about the property you are buying
Copy of signed reservation contract
Financial details
Proof of deposit (savings account, bonds…)

PRODUCTS

There are several different types of loans available, either Fixed, Variable, Capped or a “combination” of both.

Generally, financing a French property is done through a Repayment Mortgage: Capital and Interest payments are made each month but some lenders also offer Equity Release and Interest-Only products.

Endowment and Pension-Linked Mortgages are available for “Buy to Let Leaseback” properties for tax efficiency purposes. This is generally used by investors.

It is also possible to post-finance work/renovation that has recently been done on a property or even a cash sale which is no older than 6 months.

LOAN TO VALUE

The maximum Loan to Value (LTV) varies from one Bank to another, but we can sometimes secure up to 100% of the purchase or valuation price for Domiciled buyers and from70% up to 85% for Non-Resident buyers, excluding the Legal Fees. The minimum loan amount is usually 100.000 €.

Mortgages can be agreed for a minimum of 5 years and a maximum of 30 years (subject to age restrictions) depending on the type of loan required.

For French Residents, we can also finance the legal fees. If you already own a property without a mortgage charge on it, we can offer Equity Release (for specific projects) and re-finance Overseas Mortgages up to 70% of the value of the property.

LIFE INSURANCE

For the majority of French mortgages, mandatory Life Cover must be taken out.

A Medical Examination may be required depending on the Loan amount, the age and/or state of health of the Applicant(s).

Usually, you simply fill in a Standard Medical Questionnaire, which is forwarded to the bank together with the Mortgage Application Form.

DOCUMENTS REQUIREMENTS

Last 3 months bank statements | each borrower | all accounts.
You will need to provide tax returns showing rental income, pensions and dividends.
If you rent your main home: tenancy agreement and proof of the rent payments.
If you have other loans, you must provide monthly statements stating amount borrowed, monthly payments, and the expiry date.
Copy of Purchase Agreement (Compromis, Contrat or Promesse)
Mortgage application form
Life insurance questionnaire
French bank account (we can arrange this for you)
Proof of additional income (Maintenance, Pension, Rental Income…)

Proof of Income :

Employment details | Employed borrower(s)

Last 3 months Payslips
Last 2 P60s

Employment details | Self-Employed borrower(s)

Last 3 years’ Tax Returns
Certified Accountant’s letter stating Income for last 3 years
Last 3 years Company Accounts

Tags: English