Your Mortgage Questions Answered by Assetz Finance
- Can I actually afford a French mortgage?
- What if I don’t meet the criteria set by the French banks with regards to affordability?
- But wouldn’t it be simpler to just take a loan with my home bank?
- How long is it all going to take? Will it slow down my purchase if I have to apply for a French mortgage?
- Wouldn’t I be better off applying to the French bank myself or going to another mortgage broker who do not charge a fee?
- But couldn’t I find a better deal at a bank that you do not use?
- What can’t you do for me?
- And what if the worst happens and I am refused a French mortgage?
- How exactly does the mortgage process work in France?
- How exactly does the equity release mortgage process work?
- How do I calculate how much I can borrow?
- Is there a deadline to meet when applying for a French mortgage?
- How will I pay my mortgage?
- What costs are involved with a French mortgage?
- How do off-plan property mortgages work?
- Do I need to travel to France or to come to your office to arrange a mortgage?
- Can my Finance Consultant help set up the compulsory French Life insurance and French bank account?
- Is there a maximum number of applicants allowed?
- Could we purchase via a French or UK company?
- Can my partner, who is unemployed, apply with me?
Q1. Can i actually afford a French mortgage?
a. All you need to do is complete our Enquiry Form and follow our Pre-Qualification procedure which is free of charge and will allow you to find out exactly how much you can afford to borrow for your French property purchase or re-mortgage.
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Q2. What if I don’t meet the criteria set by the French banks with regards to affordability?
If you are borderline or don’t quite meet the criteria set for the product that you prefer we will advise you of this and will warn you that we will need to make a very strong and complete application to the lender and then do our best to use our influence with our lenders to convince them to authorise your application. If we think that it is unlikely that they will authorise your application we will encourage you to apply to a different lender as well or instead so that you have a back-up plan. However, in all likelihood we should be able to use our close relationship with the lenders to persuade them to accept your file and offer terms and conditions that are the closest to those you desire.
If we can see from your financial situation that it would be highly unlikely, if not impossible, for a French lender to offer you a mortgage we will advise you of this straight away so that you can organise the necessary alternative arrangements for purchasing your property. We can also assist you explore other alternatives such as a re-mortgage of another property located in Europe or a secured loan using other teams within Assetz Finance.
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Q3. But wouldn’t it be simpler to just take a loan with my own home bank?
Quite honestly, yes perhaps! Your home bank speaks your language and you are used to their procedures. Some purchasers of French property do find that this is the best route for them and in some cases may be their only route if their circumstances do not allow a French mortgage. Assetz Finance is here to listen to your requirements and to help you choose the best method of financing your property purchase. If you would like to explore all of your re-mortgage options on UK property we can also assist you with this.
Once you have established that French finance is the best route for your purchase, your French Finance Consultant can ensure that you understand the procedures used by French lenders and have all of the bilingual assistance you need. It would be such a shame to miss out on the low interest rates available in France. With Assetz Finance assisting you throughout the whole process, you won’t have to and applying for a French mortgage won’t be as daunting or as difficult as it may seem at first.
We have found that it is only if purchasers of French property attempt to secure such a mortgage with a French lender without the help of a bilingual expert that it may become more complicated than if they had applied for a UK mortgage.
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Q4. How long is it all going to take? Will it slow down my purchase if I have to apply for a French mortgage
Applying for a French mortgage should never affect the date at which you can sign the title deeds to your property. At Assetz Finance, we are fully aware of the timeframe and deadlines of the purchase process and can liaise with the agent that you are using in order to make sure we keep to these deadlines.
Once you have signed a reservation contract (for an off-plan property) or a compromis de vente (for a re-sale property) you will normally have two weeks to a month during which, under the mortgage clause, you should apply for your mortgage. We will ensure that this timeframe is manageable for you.
As long as you provide all of the supporting documentation and forms to your Finance Consultant when they require them there is no reason why applying for a French mortgage would slow down your purchase.
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Q5. Wouldn’t I be better off applying to the French bank myself or going to another mortgage broker who do not charge a fee?
Assetz Finance knows that its service speaks for itself and more than justifies the fee charged. The comments that we have received from past clients have confirmed this to us time and time again.
To our knowledge, the service offered by Assetz Finance is the only GUARANTEED Mortgage Offer Service of its kind bearing in mind all of the assistance that it includes.
If you were to go to the French bank directly you would not be able to benefit from the rapport that we have built up with our lenders that enables us to speed up applications and negotiate any problems. Nor would you benefit from the range of products that we can offer you via our large panel which include exclusive products not available directly from the lenders. Thanks to our experience in applying for French mortgages, we know exactly how it works, how to put forward the best application to the bank on your behalf and how to guarantee that the bank give you the best offer possible.
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Q6. ? But couldn’t I find a better deal at a bank that you do not use?
Over the years we have researched the mortgage packages offered by all of the French banks that offer mortgages to non-French residents and the only reason that we do not normally work with certain lenders is that we have found that their packages are not best tailored to our clients, they may take longer to process an application and do not always offer the high level of service expected. However, we do have access to their products if you are convinced that their package is the best for you.
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Q7.What can’t you do for me?
Unfortunately, we cannot of course compile all of the paperwork for you. We do rely on you providing us with all your documents and completing the application form.
We also cannot control the mortgage products of the banks or any changes to them. If the lender decides to change their rates or conditions during the time that they are processing your application we cannot stop them from offering you a mortgage that differs from the mortgage we proposed. However, we do put you in touch with your bilingual relationship manager at the bank so that you can discuss the mortgage package that they have offered you in order to establish if it differs from our proposal, and if it still meets your requirements.
We are sure that you appreciate that it is normal that, as a mortgage service, we do not assist with the above two points.
We are sure that you will agree that our service is extremely comprehensive and provides you with everything you need. We are however honest and therefore we do not promise you that we can do these above two points when in fact it is impossible for a mortgage broker to do so.
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Q8. And what if the worst happens and I am refused a French mortgage?
You won’t be if you have followed our steps and advice – you must make sure that your Finance Consultant is aware of your FULL circumstances (all loans, mortgages, debts, overdrafts, credit cards, any intended change in your employment contract, any other intended changes to your circumstances...) at the very start of the process so that they can make sure that you do not proceed with an application that would not be successful.
If you have attempted a mortgage application via another broker or directly to a lender and it has not been successful you can of course use our Mortgage Salvage Service. This service has been created due to the demand we have seen from those who have been let down or disappointed by lenders or brokers.
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Q9. How exactly does the mortgage process work in France?
The mortgage process in France is quite different to that in the UK, Ireland, America or Canada but Assetz Finance will guide you through the entire process, so there is no need to worry. Here is an introduction to what you can expect, and how we can simplify the process for you.
In France, you cannot apply for a mortgage until you have reserved a property (ie until you have paid your initial deposit and signed your preliminary contracts). However some lenders will be able to offer a decision in principle using the pre-approval form you have completed. This is particularly useful if we find your situation to be borderline and would prefer to give you a decision from a lender in order to reassure you and therefore allow you to reserve/put in an offer on a property. Once this is done the mortgage application can be prepared and sent to the chosen French bank for processing. The lender will normally take 2-4 weeks to process your application. If the application is not complete the file will be put on “stand-by” until the missing documents are provided to the lender and only once the lender receives a full application will this 2-4 week timeframe apply.
Once your application is accepted and your mortgage offer is sent to you, your Finance Consultant will help you understand your offer and guide you on how to accept the offer under French law. Once you have accepted and returned your mortgage offer to the lender, your Finance Consultant can then assist you with setting up the obligatory French bank account and finalise setting up the obligatory French life insurance policy or when applicable the UK life insurance policy that is sometimes permitted.
Once your lender receives your accepted offer they will send it on to the notaire in charge of your purchase so that he is aware that you are ready to finalise your purchase. Your Finance Consultant, as they are fully trained on the French buying process, will also be able to provide you with their Purchase Assistance Service and therefore assist and advise you on how to complete your purchase once the mortgage has been set up.
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Q10. And what if the worst happens and I am refused a French mortgage?
1.Releasing equity from an unencumbered property
If you have bought a property in the past using cash savings, you have the opportunity to release equity from this property to use as a deposit for another purchase, to pay for renovation costs of your property in France or back home, or for another reason.
If the property you purchased was an off plan property and you used cash for the first few stage payments, it will be possible to organise a mortgage to pay for the remaining stages.
You will need to appoint a notaire for this – we can recommend several to you if you require.
The packages available from the lenders that offer re-mortgages of un-encumbered and mortgaged properties do sometimes vary from standard purchase mortgages and your Finance Consultant will be able to advise you on this. In general, the amount of loan that will be offered to you will be up to 70-80% LTV and the lending criteria (income multiples and “debt ratio”) will be the same as for a standard purchase mortgage.
If you do not have a reason as such for releasing the cash you will still be able to do so however the range of products available to you will vary slightly.
2. Re-mortgaging a mortgaged property
If you have bought a property in the past using a French mortgage and would like to re-mortgage onto a better deal whilst either releasing some of the equity – if the property has increased in value – or not, we can also assist you.
Most lenders require the borrower to have a reason for requiring the cash that will be released from the French property. And they may even require proof of what you intend to do with the funds. The funds will be transferred from the lender to your notaire. The notaire will then pay the mortgage registration costs (it is compulsory for all mortgages to be registered at the Bureau des Hypothèques which incurs a charge) and then he will transfer the money on to its destination.
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Q11. How do I calculate how much I can borrow?
Some lenders will restrict your borrowing capacity to a maximum of 4 times your annual salary, much like UK lenders. However in addition to income multiples, French lenders use a second form of screening called Debt Ratio.
This ratio calculation cannot exceed 33% with most French lenders. Some French lenders are able to use a debt ratio of 40-45% maximum. This means that your monthly payments for the prospective French mortgage, plus all of your current monthly contractual financial outgoings should not exceed 33%/40/45% of your monthly income depending on the lender. By contractual financial outgoings we mean debt servicing, so mortgage/rent, any car loan, bank loan, HP loan, child maintenance payments etc. By income we mean all employment income, pension income and a certain percentage of investment income and rental income (both present and future). Some lenders are unable to take into account any investment income that is made off shore and therefore does not appear on tax declarations. Some lenders use net income rather than gross and we will take this into account when calculating your affordability with each lender.
We are often asked why French banks don’t take into account the full amount of current rental income and future rental income from the property being purchased. This is because your current rental income and future rental income may not be guaranteed and even if it is guaranteed, it is guaranteed to be paid to you, and not guaranteed to pay your mortgage. In a time of financial difficulty the bank fear that you may use your guaranteed rental income to pay for your daily living costs rather than the mortgage you have with them.
If you would like to have a go at calculating your own debt ratio we have given a summary of the calculation below. However, please be aware that each lender calculates it slightly differently and each lender is flexible in different areas so it is highly ill-advised to base your mortgage application success on your own calculations – you should check them against the calculations carried out by a specialist Finance Consultant.
In its simplest form, if you earn £3000 gross per month, and your only outgoing is a mortgage of £500.
3000 X 0.33 = 990 (one third of your gross monthly income)
990 – 500 = 490 (gross monthly income minus monthly outgoings)
Therefore, you could afford a French mortgage with monthly payments of £490 with most lenders or….
3000 X 0.4 = 1200 (two fifths of your gross monthly income)
1200 – 500 = 700 (gross monthly income minus monthly outgoings)
Therefore, you could afford a French mortgage with monthly payments of £700 with some lenders.
Figures given in your application for your gross income must be supported by the applicable documents (for example, self employed borrowers must show their income via tax returns and company accounts. Bonuses and dividends are taken into account if they can be proven over at least the last two consecutive years). Pension income can be taken into account again as long as paperwork is provided. If you own buy to let properties, then we will need to see proof of rental income (lease contract, rent receipts, payment of rental income into a bank account) in order to take it into account.
Each borrower’s personal situation varies and the debt ratio calculation therefore does not apply to the letter for all purchasers of French property.
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Q12. Is there a deadline to meet when applying for a French mortgage?
It is usually stipulated in the preliminary contract that the mortgage application should be submitted to the bank between 15 and 30 days of signing this contract. Furthermore, the mortgage must be in place (ie funds ready to be released to the notaire) before the signature of the title deeds of the property (usually between 2-6 months following reservation depending on what type of property you are purchasing). For the purchase of an off-plan property, as soon as your notaire has “notified” you of the act of sale (ie as soon as he has written to you to inform you that the title deeds are ready to be signed) you will be allowed 30 days to finalise your mortgage and have the funds in place. Therefore it is best to begin the mortgage application process as soon after signing the preliminary contract as possible (being a condition of the validity of the mortgage clause).
Your Finance Consultant will be fully aware of the timeline and deadlines of the purchase process and can liaise with the Agent that you are using in order to make sure you keep to these deadlines.
As long as you provide all of the supporting documentation and forms to your Finance Consultant when requested you will easily meet these deadlines.
Missing or inaccurate paperwork will however slow down the application process dramatically.
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Q13. How will I pay my mortgage?
Most French mortgages are paid monthly. Each month you will pay direct debit payments to the lender from your French bank account (which we help you set up). Some lenders enforce the mortage to be repaid from a bank account held with them others allow you to open and use a current account with any other bank.
You should tell your management company or lettings agency, if you have one, to pay your rental income for the property into this same bank account.
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Q14. What costs are involved with a French mortgage?
The lender’s mortgage set-up fee
The bank charges a one off arrangement fee for arranging the mortgage for you. The standard rate in France is 1% of the capital borrowed. However, Assetz Finance has negotiated this fee for our clients with most of the lenders we work with. We even have some exclusive packages that include no arrangement fees at all. Please ask for more details.
One or two lenders will add the mortgage arrangement fee to the mortgage amount like UK lenders, but most French lenders do not. They will take the fee from your current account when your mortgage funds are released for you.
Running the mortgage
Following this, each month you will pay direct debit payments to the lender (which will be set up automatically for you) of your monthly mortgage payment including the cost of life insurance cover if applicable.
If you have a “grace period” at the beginning of your mortgage because you are buying an off plan property, you will not have to pay these monthly mortgage payments straight away as they are deferred until completion of the property. You may not even need to pay the life insurance premiums if a French policy has been arranged for you however this will depend on the lender.
The Assetz Finance Fee
All of our advice, assistance and simulations are free of charge. Only once you have decided that you would like to apply for a French mortgage using our services would we charge our fee. And of course we would also only charge our fee and go-ahead with a mortgage application for you if we have pre-approved you for a product that you like and therefore we can guarantee you the mortgage offer you want.
If your mortgage application is not accepted despite the fact that you provided us with all of the information and documentation that we requested from you, you will of course receive a FULL refund of this fee.
To our knowledge, there is no other company in the market offering as comprehensive a service as Assetz Finance without charging a fee of some type. This is because the commissions received by brokers from French lenders are very minimal and cannot cover all the time and resources required to offer the type of high level of service that we do. Our non-charging competitors are subsequently unable to offer the amount of time and assistance that our services involve.
The mortgage fee is of course non refundable if your mortgage application was unsuccessful because you omitted to provide us with all the information we required for the pre-approval or you did not provide all of the supporting documentation requested. It is also non refundable if the mortgage product that the lender offers you varies from that applied for due to a change in product terms and conditions by the lender (this is unfortunately out of the control of Assetz Finance).
The conveyancing costs
Please see our Guide to Buying in France for more details about the conveyancing costs when buying a French property and arranging a mortgage in France.
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Q15. How do off-plan property mortgages work?
If you are buying an off-plan development, a “grace period” (or deferred period) can be drawn into your mortgage offer which is a period of between 3 months and 3 years during which you do not have to repay the loan whilst you are waiting for the property to be completed. This is particularly beneficial to investors as you do not have to worry about paying mortgage payments for a property that is not yet giving a return.
Most lenders will just require that the life insurance premiums are paid for each month during this deferral period. Some lenders will also defer life insurance premiums.
For off-plan properties that are paid in stages, funds are drawn down from the mortgage only as they are needed and the interest is cumulated. During the deferral period this interest is rolled up and added to the original mortgage amount. This will mean however that the monthly payment once the mortgage payments start will be slightly higher than first calculated.
Some banks make a small charge each month for releasing the funds in this way. These costs are normally low and are calculated on the basis of the diminishing balance.
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Q16. Do I need to travel to France or to come to your office to arrange a mortgage?
With most lenders we can arrange everything for you over the phone or by email as long as you are able to provide all of the necessary paperwork to support your application by post to our UK based office. However a couple of lenders like to meet all applicants before releasing the mortgage funds. Commercial lenders also need to meet their applicants face to face. If you are unable to go to France, please let us know so that we can source a product from a lender that does not require you to meet them.
Q17. Can my Finance Consultant help set up the compulsory French Life insurance and French bank account?
Of course!
A French bank account, (from which your mortgage payments will be taken, and if you are buying a leaseback or buy-to-let property, to where you will receive your rental income) is compulsory to service the mortgage.
Some lenders will automatically arrange an account for you along with the mortgage, and indeed it is compulsory to use their current account to service the mortgage. Other lenders do not offer banking facilities and therefore borrowers are required to arrange their own current account. Assetz Finance works with a number of French banks who can arrange French current accounts for non-French residents and will assist you with this.
You should also be aware of the costs involved in running a current account in France as all French banks charge an administrative fee (normally every quarter) much like a premium account charge in the UK however this applies to all account types in France. They also charge for credit and debit cards and other services. Your Finance Consultant will provide information to you about these costs.
A French life insurance policy is obligatory with the majority of lenders and in fact they also impose the policy with the insurance company of their choice. You should factor in the cost of this life insurance policy, if it is indeed compulsory, into the global cost of the mortgage product to assess whether the mortgage deal is still the best mortgage product for you. The average cost (assuming good health, no medical conditions at all and that the borrower is under 55 years of age) of the life insurance premiums is given on all Assetz Finance personalised mortgage illustrations to help you with this.
French banks are unable to insure non-residents for anything other than death (you are not covered against disability or loss of employment for example). You may have to carry out medical examinations with your doctor to send to the life insurance company if you are applying for a mortgage of over a certain amount, if you are over a certain age or if you have a certain medical condition.
Other lenders allow UK purchasers to arrange a UK life insurance policy of their choice (within certain conditions) with their UK mortgage and insurance broker instead. This life insurance policy must be arranged in a certain way and must be assigned to the French lender and therefore you will need the Assetz Finance UK Insurance team to assist you with this if applicable.
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Q18. Is there a maximum number of applicants allowed?
Each purchaser named on the reservation contract or compromis de vente must be included on the mortgage application form and supporting paperwork must be provided for each purchaser.
The bank has the final say on the maximum number of applicants allowed. If there are more than 4 applicants, the bank will decide if there is a real connection between those people and if the risk is acceptable.
If you are purchasing a property with family members the bank will normally use the joint income of the purchasers to calculate affordability. However, if you are purchasing with friends, partners, each individual purchaser needs to prove to the lender that they can afford the monthly repayments independently.
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Q19. Could we purchase via a French or UK company?
If a French company, such as an SCI or SARL, is purchasing the property, the mortgage application must :
- be made in the name of the SCI/SARL
- include certain documents regarding the company
- include full supporting documentation regarding each shareholder of the SCI/SARL and these shareholders will act as guarantors to the loan.
UK limited companies are also able to borrow funds for French property purchases but you will need to speak to our French Mortgage Team to find out if this is possible in your circumstances.
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Q20. Can my partner, who is unemployed, apply with me?
If you are both purchasing the property, you both MUST be included on the mortgage application form. As long as there are no serious past credit issues, a non-earner can apply jointly with an earning applicant.
The bank will decide how best to insure the applicants in this situation (normally they will only insure the earning applicant).
All of the necessary documentation requested by the bank will have to be provided by both applicants irrespective of whether they are employed or not (although the unemployed borrower will obviously not provide any current pay slips).
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If you have a question that is not addressed above, please do not hesitate to contact us directly to speak to one of our experienced French Finance Specialists on 0800 400 8000. And what’s more, calls will be charged at local rate wherever you may be calling from in the UK and will be charged at normal international rates if you are calling from abroad!
Please be aware that it is a criminal offence to give misleading or incorrect information in connection with a loan application. Specific actions may be taken to prevent fraud.
Please think carefully before securing any debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it. When securing a debt against your foreign property please remember that: a) your foreign property may be repossessed if you do not keep up repayments on any mortgage or loan secured on it. b) changes in the exchange rate may increase the sterling equivalent of your debt if taken in another currency. For all mortgages and loans, irrespective of their location, please be sure that you can afford the repayments before entering into any credit agreement. The figures and information quoted on this site are believed to be correct at the time of issue and are subject to change without notice.
Any quotation supplied is NOT an offer of a mortgage. In accordance with the Data Protection Act 1998 all personal data handled by Assetz Finance will be processed fairly, lawfully and in the best interests of our client. The information and personal details provided may be disclosed to companies who have an agreed partnership with Assetz Finance and who will be able to offer you financial and property services that you require. These companies may be located in your country of purchase or the UK.
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