Key points about this information item An Introduction to French Mortgages (part 2) - Midi-Pyrenees propertyInformation Description:
An Introduction to French Mortgages (part 2)
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 and more French banks are willing to lend to foreigners buying a property in France.
What types of mortgage are available in France?
French lenders offer three main types of mortgages: fixed rate, capped rate and tracker rate all on a capital repayment basis. Interest only mortgages are available but are rare and access to them is often restricted by very strict criteria.
French buyers generally tend to stay with the mortgage they take when they purchase for the entire time they own the property, so essentially re-mortgaging in France is very rare.
Due to this and due to the French lenders obligations to lend responsibly, long term fixed rate mortgages are extremely popular and easy to come by. A fixed rate mortgage is exactly that and offers the borrower a fixed rate of interest for the entire duration of the mortgage.
A tracker mortgage is a variable rate mortgage which tracks one of the Euribor indexes (Euribor stands for The Euro Interbank Offered Rate) with a bank’s margin added to it. Most commonly, the index used is the Euribor 3 month and the bank’s margin varies from 1 – 2% on top. With interest rates being very low currently, borrowers can find the tracker rates attractive, however, they should be aware that as soon as interest rates increase so will their mortgage payments.
Currently, capped rate mortgages are popular and are the perfect marriage between a tracker and a fixed rate. Capped rate mortgages offer borrowers the security of knowing that their interest rate (and thus their monthly mortgage repayment) can never increase above a certain amount and allows some of the same flexibility and lower interest rates like a tracker mortgage.
Other types of mortgages such as shorter term fixed rates do exist and guidance should be sought before choosing any specific mortgage as the exact terms and conditions will vary.
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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