Key points about this information item An Introduction to French Mortgages (part 1) - Midi-Pyrenees propertyInformation Description:
An Introduction to French Mortgages (part 1)
Many people purchasing property in France are surprised to learn that they could qualify for a French mortgage to help them finance their dream home.
French mortgages have been available to non-resident purchasers for a long time but it is only really in the last 10 years that the market has evolved and more French banks are willing to lend to foreigners buying a property in France.
How Much Can You Borrow?
The French mortgage market is considerably different to that in many other countries, including the UK.
For example, French banks are obliged by French law to consider just how affordable the mortgage is for the borrower and will take into account all of your debt related outgoings including other mortgages and loans. They will then compare this against your income and limit how much you can borrow based on a debt to income ratio rather than multiples of your income.
As guidance, French lenders often consider that all monthly debt related outgoings should represent no more than 33% of the monthly gross income (after social security contributions). Of course, this percentage is only a rule of thumb and the lender will also look at other factors such as the borrower’s assets, professional position, bank account management etc and will make any decision based on the borrower’s complete financial profile.
What about Loan to Value?
Just like in other countries, French lenders limit how much they lend based on the property’s purchase price or value (whichever is the lower), thus reducing their exposure. In the last few years we have seen some French lenders offer 100% mortgages to non-residents, but with the current banking turmoil, most of these offers have now been withdrawn from the market.
Typically, non-residents can expect to achieve a loan to value of up to 80 – 85% depending on their personal situation and country of residence. Exceptionally, mortgages of 90 – 95% are available for exceptionally good profiles where a valid reason for the borrower not to put down more in terms of deposit is present (exchange rate fluctuations for example).
Borrowers from most countries including all EU countries, the US and Australia can expect to achieve the loan to values mentioned above, although residents of some countries such as Russia and China may find they have to put down more deposit initially as the banks try and reduce risk exposure.
Article written by Sharon Hill, Mortgage Broker at French Mortgage Direct.
For more information on French mortgages please visit www.frenchmortgagedirect.com or call 0044 (0) 800 530 0673
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