FAQ - Mortgage in France for foreigners
Getting a mortgage with French Mortgage Expert by Carte Financement
We were created in 2009. We are not only brokers who find the best rates. We provide you financial advice, support during the French purchasing process and follow-up with banks.
The service means tailor-made services, as each client is different and wishes to carry out a different project. Thanks to our international and financial background, we know the non-French client needs and provide the customized financial advice.
We have designed specific simulations in English which can also be translated into other languages on request (Russian, Italian, Arabic, Spanish…). These are more detailed than the French ones.
We help international clients to get a mortgage for a project cost above 200 000 €.
Numerous types of banks do exist. Each French bank has some client profile targets. As we work with a wide range of financial institutions, we know exactly which bank is the best fit for each type of client and need.
Thanks to our prime relationship and volume of records with our partner banks, we are likely to obtain the best conditions on mortgages and we know how to present your projects and financial needs in the best possible way. In addition to obtaining a low interest rate, we are likely to cancel the early repayment penalties, to negotiate the life insurance rate linked to the mortgage and the bank fees. Finally, your financing file processing time will be reduced and we take care of the banking relationship on your behalf in order to help you save time.
In addition to the commission you are willing to pay to your estate agent, you will also need to pay additional charges: notary fees, guarantee costs, bank fees and broker fees.
The notary fees are mandatory and are designed for the different taxes the notary is mandated to collect on behalf of the French administration. Guarantees are required by the bank in the event of the borrower default. Possible options are « Hypothèque », « Privilège Prêteur de Deniers (PPD) » and « Caution » (garantor or a pledged asset).
Bank and broker fees are related to the set up and the processing of your file. This represents a very small proportion of the overall cost of the mortgage.
We do charge fees for our service. These are success-based and are always quoted to you upfront with transparency. You have our assurance that you pay us a service that allows you to optimize the total cost of your mortgage, provides you the quality advice and the guidance that you need at every step of the process.
If you have sufficient cash to buy your French property, the best financial strategy might not be to avoid using a French mortgage. Here are the main reasons why:
- Reduce the risks on currency exchange: the exchange of your currency asset against Euro may not be as favorable when you purchase your property as it should be. By taking a mortgage in Euro, you spread your payment over time instead of moving the full value at once, which reduces the risk. Then, when the exchange rate improves, you can choose to terminate early your French mortgage.
- Reduce your taxes on rental income: you can reduce your amount of rental income declared to the French tax administration by the interest paid on your French mortgage. This only applies to mortgages subscribed in French banks.
- Take advantage of the low French interest rates: As a combination of the low points of the three month Euribor (European Interbank offered rate), on which most French variable mortgages are based, and the economic outlook forcing investors to seek the safest long term deals and contributes to have trust in the French government bonds, French interest rates have historically been one of the lowest in Europe.
- Combine your mortgage with a saving program: Your overall return on investment will likely be higher by opting for a French mortgage and retaining the rest of your capital in local investments. Our experts will help you to find the right combination.
- Increase your budget: a French mortgage will help you to improve the size, the location or the style of the property.
- Reduce you French wealth tax: the French wealth tax (Impôt Sur la Fortune) is an annual tax on the net value of your assets (property, cash and investments), applicable over 1,3 million Euro in asset value. The property values are reduced by the outstanding capital of your French mortgage.
Bank system in France
It is difficult to answer easily to this with precision. It depends on your financial situation and your objectives. Here are the essential items that give you an insight of the loan amount you can obtain:
- Maximum monthly payments: the total loan outgoings should not be more than 35% of your income (considering the last 2 years income average).
- Income stability and levels: key elements for the banks to grant a loan, if your income is variable, your debt ratio will be reduced to under 30% of your income, however, if your income is regular and predictable you are able to sustain a debt over 35%.
- Personal contribution: your deposit is a key element to appraise your saving capacity and of course your contribution to the project. The banks agree to finance the agent fees but not the notary cost.
- Loan amount: once you have estimated the maximum payment, you can use our financial simulator to identify the loan amount in accordance with the duration of the repayment (15, 20 or 25 years).
One of the main key calculation French Banks use to determine the eligibility to borrow is the 33% debt to revenue ratio.
Your monthly payment related to the new mortgage, plus the existing loan payments (other mortgages, rent for residence, personal or car loans), should not exceed one third of your net monthly income. If you are married, your spouse’s loan payments and income are taken into account.
In order to determine your stable income, the banks will look at your salary, rental income (70 to 80% of the rental income is used for the calculation), pensions and annuities received. You can include the allowances and social benefits if these are maintained during the loan duration.
If you are self-employed, the banks will calculate the income by taking your percentage ownership of average net profits (annual salary and dividends) over the past 3 years.
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The list of document will depend on your situation and the type of project. However here is a list of standard requirements:
- Identification: passports, marriage certificate, utility bill, council tax bill.
- Income: payslips, employment offer, pension income, P60s or W2s, leases for rental income, company accounts & accountant letter for self-employed.
- Debts: mortgage statements, car and personal loan statements, credit card statements.
- Assets: property valuations, stock portfolio statements, savings accounts, other investments.
- Taxes: inland revenue declarations, 1040s, notices of assessment.
- Bank Statements: The movements of the last 90 days for all your bank accounts
- Property: purchase contracts or property title.
Numerous elements will be taken into account, but a few are really important:
- The professional stability and seniority for the employees.
- The debt to revenue ratio, which should not be over 35%.
- The saving capacity, proven with established saving accounts.
- The project quality: the banks pay attention to the property quality (geographical area, construction) and the client’s life project.
A banking business is distinct from a pure money-lending business, as they offer the wide range of banking services. When you sign a mortgage with a bank, you will have to open a current account and the bank will ask you to deposit your salary on this account.
A mortgage lender is a financial institution from which you receive money to purchase a home; they do not offer traditional banking services and specialize in making mortgage loans.
A pure lender pays a special attention to your financial file as he is likely to analyze more complex situations.
If you are self-employed, the banks will calculate the income by taking your percentage ownership of average net profits (annual salary and dividends) over the past 3 years.
In addition to the classical document list required for a mortgage, banks may ask for extra documents like the accounts of the last 3 years for the company, the last 2 years personal tax returns and a certified accountant’s letter stating the income of the last 2 years.
