It’s early 2021, we are all impacted by lockdowns and strict travel restrictions. Against all odds, Non-Resident buyers are still active in the French property market. Here is a brief overview of mortgage lending in a post BREXIT world :
- Overall, few changes as a result of BREXIT but some new pitfalls to be mindful of… The end of the EU financial passporting system has become a significant hurdle for UK intermediaries. EU lenders have taken steps to avoid being regulated by the UK FCA. More hoops to jump for British residents but nothing that can’t be overcome.
- Many individuals can’t get what they are looking for… Large disconnects between expectations and reality… Sadly, lending propositions do not meet demand
- Most lenders and insurance companies are able to accommodate a full remote origination process (No travel required). The most challenging aspect of processing a case remotely is often related with the mortgage Life Insurance application process. Undertaking medicals required by insurance companies can be challenging in periods of lockdowns and over-stretched health resources.
- Interest rates remain extremely low. No pricing for risk…. You are either in or out.
- Strict lending underwriting criteria… strong emphasis on affordability
- “Escape to the Château” may be fun to watch but won’t get lenders excited…. Gîtes, Fishing lakes, wedding venues etc even with the most robust business plans will have to be self funded
- Interest-only plans without collateral available up to 75% / 80% LTV
- Capital repayment plans available up to 85% LTV
- Duration up to 20 years. 25 years at a stretch
- Limited appetite for small amounts (<€150k), complex deals and non salaried applicants
- Lower rates available with Assets Under Management at ~60% LTV
- Lending to US persons still impacted by FATCA but some interesting propositions available
- Service is “hit and miss” and generally slow …. Depends on who you know. People trump processes…
- Private bank lending a good option for assets >€1m…. better service & expertise
Bluesky Finance is a France based independent specialist mortgage broker. We search and arrange high-quality mortgage solutions for international buyers. firstname.lastname@example.org + 33 (0) 9 82 56 61 57 More information
If you have plans to relocate to France, you may be eligible for very advantageous tax arrangements, subject to certain conditions.
The expatriate tax regime applies to individuals who were not residents of France for tax purposes during the five calendar years prior to their taking up their duties in a company based in France.
Most French mortgages come with early repayment fees or penalties also know as ERC. If you have an existing French mortgage and are contemplating remortgaging in France, there are several things you need to be aware of .
Firstly ERCs are capped by law and cannot exceed the lower of 3% of the outstanding mortgage amount or the equivalent of interests paid over a 6 months period.
Besides, under certain circumstances, French lenders are not permitted to charge ERCs. More specifically, ERCs cannot be applied to French mortgages advanced after 1 July 1999 if the redemption of the French mortgage is due to :
1. the sale of the French property and the sale of the french property is correlated with a change of employment
2. the death of the borrower or co-borrower
3. unemployment of one of the borrowers
Here are a few simple tips to get the best mortgage deal in France. The following recommendations particularly apply to international buyers who can have access to a wide range of mortgage products when buying or refinancing in France.
1. If you can afford the monthly repayments, select a shorter duration for your mortgage contract. In France, the shorter the duration, the lower the mortgage rate.
2. Always factor the cost of the life insurance premium. Lenders will not advance euro denominated mortgages unless a life insurance has been assigned to them. Mortgage insurance is an important cost component of a French mortgage and can represent as much as 25% of the borrowing cost. So make sure to include the life insurance element and don’t simply focus on mortgage rates.
3. Do not go straight to specialist lenders catering for international buyers. They deliver a good service but it can come at a premium cost. Shop around and compare.
4. Negotiate ! In France, fees and mortgage rates are not always set in stone. Bargaining is common place so make sure to challenge the lender. If you are not comfortable pushing back, get a broker to do the negotiating on your behalf.
5. It’s location, location, location but not rates, rates. To get the best mortgage deal, always include fees (completion fee, early redemption fee) and the cost of the guarantee that the lender will require. Fixed fees can make a big difference to the overall cost of a French mortgage.
6. If you want to have access to the whole of the French mortgage market, use an authorised French broker. Make sure that the mortgage broker is regulated to arrange mortgage contracts in France and make sure that the broker can also arrange life insurance contracts. A French mortgage broker has a best advice duty and cannot charge fees before completion.
For further information, make sure to contact us.
Mortgage protection insurance is mandatory when taking out a mortgage in France. The majority of French lenders require that borrowers are insured for the amount of the loan through a life insurance policy which is assigned to the lender.
With mortgage insurance premiums accounting for as much as 30% of the total borrowing costs, it pays to shop around and switch. French banks offer block insurance policies which tend not to be as competitive for younger or senior borrowers. A qualified and regulated mortgage and insurance broker will be able to provide you with tailored advice.
Sale and rent back is a facility where owners of French properties sell their properties for cash and maintain the right to remain as tenants for up to five years with an option to purchase the property back.
Sale and Rent Back can be an appropriate solution for owners and landlords
- who want to achieve a quick sale
- who have fallen behind their mortgage payments
- who need to repay or consolidate debts or late taxes
- need to raise finance for business or property investment purposes
- who manage a Buy to Let portfolio
- and who want to maintain the right to use or let the property
We have access to a panel of institutional investors who can arrange sale and rent back schemes. Feel free to get in touch to find out whether a sale and rent back scheme can be the right solution for you.
With French mortgage rates dropping to all-time lows, now can seem the perfect time to remortgage. But before you start the process of looking for bank statements and pay slips, here are a few guidelines to help you assess whether it makes sense to refinance the loan you took out to buy your French home.
1. Remortgage if you can minimise your total cost of borrowing. Switching mortgage provider in France is not as smooth as it can be in the UK. In addition to the administrative process, refinancing involves fixed and variable fees. All in all, legal fees, early repayment charges and administrative costs will account for about 5% of the loan amount. It is therefore important to look beyond interest rates.
As a rule of thumb, re-mortgaging will make sense and will save you money if:
– The rate you are currently on is 1% higher than the new rate you are offered;
– You are closer to the beginning than the end of your existing mortgage loan;
– Your outstanding balance is higher than €50,000.
Finally, as lenders require mortgage protection insurance, you will need to consider the cost of a new policy, particularly if you have new or pre-existing medical conditions.
2. Remortgage to raise capital If you have equity in your home or don’t have a French mortgage, it may be worth contemplating taking cash out in addition to re-mortgaging. Borrowing against your French property can be a very effective way of raising capital, financing renovation work, or repaying more expensive debts either in France or in the UK.
3. Remortgage to switch to a fixed rate loan
If you intend to keep your French property for the years to come, a low rate environment can be a perfect time to move from a tracker to a long term fixed rate mortgage. Similarly, if you are on an interest only deal, it may be worth remortgaging to avoid early repayment fees and to anticipate the amortization period.
In any case, an authorised mortgage broker will be able to assist you with exploring options and recommend a product suitable for your needs.