Lending criteria in France are far more complex and restrictive than in the UK and the whole process of getting a French Mortgage can take quite a lot longer than most people expect.
French Mortgage lenders expect clients to put down a deposit of at least 20 per cent and to have a reliable income stream. If a client is able to put down a deposit of 40 to 50 per cent, other aspects of the loan may be offered on more favourable terms.
Lenders stipulate that a client’s debts and liabilities must not exceed around 35% of income. French lenders will ask for details of other mortgages as well as current account statements, to ensure there are no other debts repayments that may have been overlooked. Some French banks will take into consideration income from buy to let houses and other non salary income, all of which can help when presenting a loan request to the bank.
As in the UK, lenders do not like a loan to go beyond a client’s 80th birthday. It is better, though, if the loan will be repaid by age 65 for the simple reason that French mortgage lenders insist upon life cover being effected, generally via their own insurer. If life assurance cover starts after a 65th birthday, costs rise considerably.
Nowadays, prompted by TV programmes such as the UK Channel 4′s “No Going Back”, some many buyers are tempted to give up their UK career, sell their house and try their luck abroad. This can be fine if they are cash buyers, but if a euro mortgage is still required it may be impossible to source, as the borrower is effectively unemployed.
Often it is better to look at other more creative ways of funding your French property purchase, such as through raising capital against your home property as security.
There is also the currency risk that should be considered if a buyer has a Euro loan and income in a different currency. In these circumstances, not only will the borrower’s liabilities rise if interest rates rise, they will also go up if that different income currency weakens against the Euro, as more of that income is needed to buy the same number of Euros.
Capital release and home improvement loans are available now in France, but some banks will levy restrictive terms, so it pays to search the market for the right product.
The complexities of currency, language, customs and local law all add up to make negotiating a euro mortgage a far more complex task than the equivalent UK product. Add to this the relaxed French attitude, which is one of the main reasons so many people move across the Channel and you may see why house hunters should allow plenty of time to get their finances in order before searching for their dream home in France.