FINANCING FRENCH PROPERTY
Define your budget, and analyse how it will be financed.
If a mortgage is required, decide whether you want to borrow against collateral held in your home country or whether you want to borrow against the property you intend to purchase in France. In the latter case one would use a French Bank. This is not as daunting as it may first seem as many banks have multilingual departments specialising in loans for foreign buyers and many familiar banks, (Abbey National, Credit Agricole, Barclays...) have French divisions set up for exactly this purpose.
Speak to a couple of Banks in order that you have an idea of what they will be prepared to lend.
Assess the costs of restoring a property in order that you can make an informed decision when you find a property requiring work. Most property will require some degree of work to meet your requirements.
Here are some of the principal issues that concern lending in France.
Loan to Value
Most banks will lend up to a limit of between 70 and 80% of the purchase price. They often conduct a survey to ensure that property represents true value on the market and will scale down lending to comply with their valuation should they feel the property to be overpriced.
Standard loan documentation
If Employed:
-
Last 3 months pay slips
-
Last 2 P60’s
-
Last 3 months bank statements
-
Schedule of all existing mortgages and loan repayments
-
Copy of passport
-
A recent utility bill
If self employed:
-
Previous 2 years tax returns
-
Audited balance sheets for the previous 2 years
-
3 months bank statements
-
Copy of passport
-
A recent utility bill
Variable or Fixed
The two main categories of mortgage available tend to be split down into fixed and variable rate. Variable rate mortgages are generally linked to the EURIBOR (European Inter bank offered rate) and will often be fixed for the first year and capped thereafter. The cap takes one of two forms; sliding repayment periods or sliding payment amounts over a fixed period. The way that this calculation is made varies from product to product. There are usually no penalties for early repayments.
Fixed rate mortgages on the other hand are offered at a rate which tends to be higher than that of the variable rate. Loans are offered for periods of up to twenty five years and there are usually penalties for early repayment.
Criteria
Repayments on lending is not allowed to exceed a third of your income. Projected income from rental is not taken into account unless it is guaranteed as part of the purchase contract with a new development.
Usually the banks will not allow mortgage repayments to run beyond the age of 80.
Immobilier Le Bonheur - for all your french property transactions.