What interest rates are used in France?
French mortgages are based on the Euribor index (EURIBOR stands for Euro Inter Bank Offered Rate) and are either based on the Euribor 1 Month, 3 Months, 6 Months or 12 Months Index. To find out more about the Euribor, please visit the official website: www.euribor.org
What about Buy to Let and Leaseback Properties?
A significant number of people purchase buy to let and leaseback property in France as these are attractive investment alternatives to buy to let property in their home countries. Some lenders will take into account a % of your future rental income from leaseback or buy to let property. In the case of buy to let property you will need to sign a management contract with a lettings agency for this to be taken into account.
For French leaseback property, the question often arises whether lenders will provide a mortgage on the VAT exclusive purchase price or the VAT inclusive purchase price. The answer to this question is that it depends. Some lenders will lend on both the ex VAT (called HT in French) and the inc VAT (TTC) prices depending on whether or not the developer is advancing the VAT (only a small percentage of developers advance the 19.6% VAT rebate associated with new build leaseback property). Some lenders will let you keep the VAT rebate when it is refunded while others will ask you to use it as to make an early repayment to your mortgage.
Is life insurance required?
It is mandatory to take life insurance in France to cover the mortgage (which is basically a death cover). The standard process is that this is arranged at the time of the mortgage and most lenders will only accept an application if this is the case. For those wishing to put down a larger percentage of the property value (more than 50%), life insurance may not be required although this is rare. Some lenders may allow you to use a UK based policy.
Arrangement fees and valuations
The French Mortgage market is a lot less competitive between lenders than the UK market, and most lenders only have a handful of products on offer compared to UK lenders who may have a dozen or so at least! All French lenders will charge a set up fee (often called Frais de Dossier) which can either be fixed, or a percentage of the loan taken out.
French bank accounts
If you take out a mortgage in France you will need a French bank account for your direct debit payments. It is advisable to set one up at the same time as you make your mortgage application (it is usually done with the bank who provide the mortgage or we can help you to set up one within 24h).
How long does an application take?
If you are applying for a French mortgage you will be required to provide numerous documents such as your last 3 months bank statements, savings accounts statements, mortgage statements etc. Providing that the application you file is complete and no documents are missing, a mortgage offer can usually be issued within 2 – 4 weeks. A typical example of required documents would be:
– Copy of the passport
– Last two years P60s or tax declarations
– Last three months wage slips
– Last 2 or 3 years accounts for self employed applicants
– Last 3 months bank statements
– Mortgage and Loan repayment schedules and/or statements
– Any relevant document showing the personal contribution (deposit)
– French bank account details
– Proof of rental income for any buy to let properties already owned
– You will also be asked to supply copies of your reservation