French mortgage products are structured in a similar way to the products you might be used to back home. However, in France, they have some important differences you will need to understand before you applying.
You will find further information on our Mortgages Overview page.
- Capital Repayment mortgages are the most common and the most easily obtainable product.
- Interest Only products are available, but there are very strict wealth and income qualification tests.
- Fixed rate, variable rate or capped interest rate products can be negotiated.
- Equity Release products are available, but there are restrictions on how the released equity can be used.
- Refinance products are severely limited.
- Post purchase products need to be arranged within 6 months of the property purchase date.
- Loan duration can be from 6 to 30 years.
- Maximum LTV (Loan to Value) ratio of 100% for French tax residents and 85% for French non-residents.
- All products require the applicant to pass a stringent DTI (Debt to Income) ratio test.
- Mortgage protection life insurance is generally required for all products with an LTV above 50%.
Capital Repayment vs Interest Only
Capital repayment loans are the standard product and account for around 90% of all property lending in France.
The French Interest Only Mortgage has evolved to meet the needs of the wealthy facing potentially high tax liabilities, notably the ISF.
To qualify for an interest only product you will need to prove that you:
- Can afford the repayments on a repayment mortgage of the same amount.
- Have substantial personal net wealth over and above any equity in your main home.
- Do not need to exceed 75% LTV.
- Have a credible source of funds sufficient to repay the loan at term.
For most borrowers, a repayment loan is the best option.
Fixed Rate vs Variable Rate
Both fixed rate and variable rate products are available.
There are also products that allow you to switch between types during the lifetime of the loan.
Variable rate products normally have a lower interest rate, typically 0.5% to 1% lower. However, interest rates fluctuate over time with the economic cycle so there is an element of long term risk.
At the current low interest rates, a fixed rate product may be a better long-term investment than a variable rate product.
For more information read our Variable Rate vs Fixed Rate post.
In France, banks view mortgages as a long-term product intended to help you buy a property you will own for the long-term.
A French Equity Release Mortgage product is thus an exception, not a right. You must convince the lender that you will use the released funds sensibly.
You cannot use Equity Release Funds to support income or to provide a substitute to a pension: A Viager sale is the right solution in this situation.
Because French banks view a mortgage as a long-term product, switching between banks and products is discouraged.
French Refinance Mortgage products will normally carry a higher interest rate than mortgage products for initial property purchase.
French lenders are normally reluctant to provide refinance products. They place limits on any refinance that would have the effect of lengthening the repayment period and or increasing the outstanding mortgage amount.
The Importance of Income
A lender will consider both your income level and how secure your income is.
Your ability to repay the loan from your income is more important than the value of the renovated property. This makes it much easier to finance restoration projects, property extensions, property conversions and swimming pools to name just a few of the projects we have arranged finance for.
Affordability of French Mortgage Products
LTV (Loan to Value) must not exceed 85% for capital repayment products and will be as low as 50% for some other products. However, different rules apply to French tax domiciled individuals.
The monthly repayments on all loans you will be responsible for paying cannot amount to more than 33% of your income.
You will need sufficient residual income to live on. This amount will depend on the size of your family, but will generally require a minimum income of more than €26,000.
Restrictions on Property Use
There are no restrictions on how you use the property.
If you plan on offering your French home for Holiday Rental, or even on a “buy to let” basis, you should encounter no difficulties. However, if you let your property you will need to consider the Tax Implications.
French banks normally ask you to take a mortgage protection policy.
We will help you arrange the best policy for your individual circumstances.
The lender will not ask for insurance for loans of 50% LTV and below.
French Consumer Law
The relevant body of law is the loi Scrinever. Most importantly, this sets out the obligations of the lender and provides some basic protection to the applicant.
You should also understand the Consumer Protection that is available to borrowers.