Mortgages in France

Briefly about the main thing

Thanks to government support and control, as well as the availability of loans, the mortgage market in France is currently one of the safest in the world. It is worth noting that most real estate purchases in France are made with the participation of credit funds.

In times of low interest rates, a loan is not only a way to finance the purchase of real estate, but also a way to make money. Experts note that the low rate "will be covered" by inflation over the coming years. It is this factor that they recommend to accept and "overcome" the psychological pressure of the concept of a loan as such.

Taking into account the fact that when obtaining a mortgage loan, borrowers are also given preferential deductions when paying taxes, and in a stable rental market, you can make good money by renting an object purchased with a mortgage, square meters are a true guarantee of stability and a profitable investment. Foreigners, buying real estate in the Fifth Republic, are increasingly resorting to borrowed funds.

The conditions for obtaining credit loans for non-residents of France are more complicated than for citizens of the country, while most major French banks provide mortgages to foreigners. As for the basic requirements, they are the same as for residents of the country: to have a confirmed income that covers the loan payment three times, as well as a sufficient amount of funds for living, taking into account the remaining amount.

Interest rates

Interest rates are regulated by the rates of the Central Bank of France, and, contrary to numerous forecasts of banking experts, have not been growing for many years. This is very pleasing to buyers who actively resort to bank financing. Lending rates in France are fixed and floating. With a floating rate, its indicator is subject to revision every three months: only the bank margin is fixed. It is worth noting that in recent years, banks have greatly increased their margins due to low rates. As for the average rates, for Russians they average 2.3-2.5%.

Loans with floating rates should be approached with more attention than with fixed rates. Since they are examined by the bank every three months, the first payment is made at a preferential rate, which may give the impression that the conditions for the loan are more favorable. Therefore, it is necessary to compare the preferential rate with the current reference rate. As for the maturity of loans, they range from 7 to 25 years, and the rate is calculated in proportion to the maturity. It is more typical for foreigners to receive financing for up to 15 years.

List of documents

As for the list of documents, then, as in any country, banks may impose different requirements on them. The main documents that foreign citizens will need to obtain a mortgage loan from a French bank are:

• A copy of a foreign passport;
• A copy of the marriage or divorce certificate;
• A copy of the preliminary contract for the purchase and sale of real estate signed by all parties to the transaction (buyer, notary and seller) or a reservation agreement in case of purchase of a new building;
• Personal income tax for the last two or three years and the past months of the current year, as well as an employment contract (for employees);
• Tax returns,articles of association and balance sheets for the last three years (for entrepreneurs);
• Bank account statement for the last three months
• Table of monthly payments on other loans and loan agreements (if any);
• Documents confirming the availability of additional income: tax benefits, income from renting housing, pensions, dividends;
• Certificate of ownership of real estate.

It should be borne in mind that the bank may also request additional information, for example, a certificate on the health status of the borrower. All documents must be translated into French and certified either by a notary or by a certified translator in France registered with the Tribunal.

Initial payment

Since the legal mechanism for the execution of mortgage loans is very complicated, non-resident French banks provide loans for no more than 70% of the value of the purchased object. Thus, the borrower must have 30% of the amount on hand, plus the costs of registration. But banks prefer when there is a reserve of funds on the borrower's balance sheet, and this may affect their decision. Experts note that it is most likely to get a loan in France if there is half the amount of the price of the purchased object.

Loan terms and Conditions

There are three conditions according to which the objects are evaluated: they must have the appropriate "market" quality, have no encumbrances and correspond to the declared value. To do this, as in any other country, banks order an examination of the object, the result of which should be a price not lower than the initially specified cost. Otherwise, the bank may not refuse the loan, but reduce the loan amount in proportion to this difference.

The exception is new buildings — banks take the word of developers. Some banks do not finance investment real estate, and some, on the contrary, prefer it. In order not to make a mistake with the choice of a bank, it is worth enlisting the support of a reliable real estate agency in France.

Registration procedure

• First of all, the object is selected and the corresponding contract is signed. In order to avoid penalties in case of non-receipt of a loan, the conditions for obtaining a loan are entered into the contract.
• Then the official registration of the loan in the bank takes place, which can be done either independently or with the help of intermediaries - a real estate agency or a private broker. Experts note that the recommendation is especially important for residents of the Russian Federation, unfortunately, banks are often afraid to take Russian clients "off the street".
• The next stage is the filing of a dossier, which includes a letter of recommendation, a preliminary contract, a client's biography, civil status documents and documents at the request of the bank.
• Credit insurance is issued separately: the insurance dossier must be confirmed by the insurance company. Previously, the bank itself was engaged in insurance, now they were forbidden to "tie" insurance to loans on their own.
• Recently, for some categories of foreigners, an additional document from a local lawyer was also introduced, indicating that the purchase of foreign real estate is not prohibited by the legislation of his native country for this client.

All documents must be submitted either in French or English, or with a certified translation.

The subtleties of obtaining a loan

The dossier can be sent to the bank by e-mail in scanned form: originals are not required for consideration. When the bank reviews the dossier and agrees to the financing, it will ask for the originals and send its loan offer to the client. This offer cannot be signed earlier than ten days after receipt. If several people are buyers, then each gets a copy separately. The signed offer is sent back to the bank, and within a week the bank transfers the money to the notary, who includes the loan agreement in the purchase certificate and registers the encumbrance in favor of the bank. As for choosing a bank, there are no clear recommendations here, in many respects the decision depends directly on the identity of the bank employee who will consider the application. A number of banks have a separate service for working with foreigners, but it is easier to contact at the place of purchase.

A separate specifics of lending exists when buying new buildings. When a bank issues a loan, the full amount is not always physically necessary for the purchase, since the payment for new construction in France is carried out in stages, after each next payment is closed. First, the buyer pays his part of the funds, and then the bank, in accordance with the tranches prescribed in the contract.

Some expert advice to anyone who has decided to get a mortgage loan in France

1. Calculate all your finances as accurately as possible in advance and correctly provide all income reporting documents.
2. Having understood the amount of the monthly contribution , compare it with your capabilities.It sounds corny, but that's where you have to start. Moreover, it is recommended to count according to the "worst" scenario, that is, with a margin, since you must be 100% sure that there will be no incident with payment. After all, when signing a financing agreement, there is an irrevocable write-off from your account in favor of the bank.
3. After you make sure that you can afford a loan, make a more subtle calculation. Compare the terms. The total cost of a loan increases with an increase in the term at the same rate, but, nevertheless, at low rates, long loans are much more profitable, since calculations are carried out at face value without indexing.
4. Compare the bids. Calculate both options — with a fixed rate and with a floating one. When floating, try to extrapolate the dynamics of the reference rate.
5. Pay attention to the presence of fines in case of early repayment and arrange with the bank to remove them. Usually, after the fifth year of successful loan repayments, banks allow you to do this.
6. When buying new buildings for investment purposes, it is sometimes convenient to postpone the payment of the loan at the time of delivery of the object and the beginning of income generation. In this regard, banks allow such a clause in the loan agreement - deferred payment on the loan.
7. Take into account notary expenses when making a transaction (from 6-8% in the secondary market and 2.5% for new buildings).
8. Ideally, have funds in your account to repay the loan within six months.

Portal HomesOverseas.ru thanks Irina Duport for her help in preparing the article (Immoconcept) and Irina Divinina (Francedom).

_{photocredits: dmitry kruglyak /flickr}