French mortgage rates are at a historic low, so exploring a possible loan for your property purchase makes good financial sense.
Mortgage rates can be fixed or variable rates or a combination. The better the profile of the borrower, the better the offered rates will be. For non-residents, French banks will loan a maximum of 85% of the assessed value of the property plus planned, documented renovations to most non-resident buyers. Real estate agents’ fees can be included; notaire fees cannot.
The Banque de France sets the loan-to-income ratio for issuing mortgages. Your monthly outgoings plus the monthly mortgage repayment should not normally exceed 33% of your gross monthly income. Ordinarily, French banks very strictly adhere to this loan-to-income ratio. However, for borrowers with a strong profile the French banks may allow the debt to income ratio to go above 33% depending on what investments and other income they have.
Borrowers must obtain life insurance to guarantee the loan. You are not obliged to take the insurance offered by the bank providing the mortgage, and it may pay to look to the competition for lower premiums. Recent legislation, the loi Hamon, allows a borrower a year from the start of the loan to exchange their insurance policy for one whose premiums are less expensive.
You should also ensure that you can transfer your loan to another property, if you sell yours before you have paid off the loan. Early mortgage redemption penalties can be as high as 3% of the loan amount.
If you are seeking a mortgage in France, you can ask for the preliminary sales contract to include a conditional clause for financing. This sets out the intended loan amount, rate of interest, and length of the term. If you can’t obtain a loan on terms as favorable as those, you are released from the obligation to buy the property without penalty.
Sellers of luxury property in Paris sometimes prefer a buyer who does not need a loan contingency clause. So, agreeing to waive this conditional clause can be a negotiation point.
For the latest French mortgage rates, and to see how much your monthly French mortgage payments would be for a given loan, see our French mortgage calculator.