Have a Home in France Already?

WANT TO BUY IN ANOTHER COUNTRY?

KEEP BOTH PROPERTIES!

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EQUITY RELEASE ON YOUR FRENCH PROPERTY

  • Do you own a property in France with NO mortgage on it?
  • You want to buy a new home in another country, but cannot get a mortgage for that country?
  • Look no further – release the equity from your French property and become a cash buyer abroad!
  • Equity Release is a term commonly used to indicate the release of capital from a real estate property.
  • In France you can release up to 75% of the current value of your French property in cash to purchase a property abroad.
  • There is a minimum loan amount of 100,000 euros.
  • The French product allows you to release funds from your French property that you will then pay back with monthly payments.
  • It is not possible in France for non residents to have a mortgage without monthly repayments until your death or the sale of your home, like in the UK.
  • You will need to justify the purchase of the new property in one of the accepted countries listed below.

EQUITY SWITCH MORTGAGES IN FRANCE

  • Equity Switch mortgages in France are now available for up to 75% of the current market value of the property.
  • The mortgage monies can only be used to finance the purchase of a property in a designated country – see list.
  • The transaction can only go via the Bank to a French Notary then onto the Legal Notary in the new country.
  • The client never gets to access the mortgage monies for his/her own benefit.
  • Only available for Main Residency homes or Second Holiday homes.
  • No commercial links must be connected with the new property in the overseas country.
  • Only Repayment Type mortgages are available – currently no Interest Only products.
  • Up to 25 years repayment duration possible.
  • The overseas purchase must strictly be a “cash-only” purchase – no extra mortgage in the other country.
  • It makes financial sense to release equity on your property, rather than take out a personal loan, as the interest rate on a French mortgage will be far lower than that charged on an unsecured personal loan. 
  • French equity release mortgage interest rates are generally 1-3% below the UK/USA equivalent, so it may be cheaper to borrow the money in France.
  • Also, it is generally accepted that it is safer to have your exchange rate risk based on the monthly mortgage payment of the value of the entire property.

TRANSACTION COSTS

  • Before applying, it’s important to have an estate agent provide a conservative valuation of the resale value for your French property.
  • There are also transaction costs to plan for when considering if your current property value is high enough for the project to make sense.
  • By taking on an Equity Release mortgage in France, you will also have to pay mortgage registration tax (“hypothèque”) which varies depending on the loan amount.
  • in most cases, a French notaire must change the charge registered on the title of your property from the old bank to the new bank, the cost of this tends to be about 1.5% of the new loan amount.
  • French banks will typically charge up to 1% as a fee to set up the loan.
  • You will also have to open a French bank account if you do not already have one which will have an annual fee of approximately €100 per year.
  • ICE Finance charges a fee as specialists which will be payable on acceptance of your mortgage offer.
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FINDING OUT HOW MUCH YOU CAN BORROW

  • The first step is to speak with a professional French mortgage broker like ICE Finance who will ask a few important questions to establish your eligibility with a number of different banks.
  • Initially we will want to understand your existing debt to income ratio. This is calculated by dividing your outgoings for debt payments by your gross income and should not exceed 33%.
  • In simple terms, this means that if you earn the equivalent of €3000 per month, a French bank will not allow your total payments for your existing borrowings and the future mortgage to exceed €1000 per month for a second home.
  • Request a pre-approval decision now and let us work out how much you could borrow.

EQUITY SWITCH MORTGAGE PRODUCTS

  • French mortgage products for ‘Equity Releases’ are designed to maximise security for the borrower as this is what the market wants.
  • Therefore the majority of loans in the French mortgage market will be on a long term fixed rate or a capped variable rate.
  • These product types ensure you know how much you will pay each month – or in the case of a capped mortgage, what your maximum exposure could be.
  • Variable length mortgages
  • The majority of variable rate tracker loans are ‘elastic’ and can stretch the mortgage term by up to five years if rates increase so that your mortgage payment will remain the same even if rates increase by as much as 0.75%.
  • In addition, any increases to the mortgage payment are generally limited to the rate of inflation per year, meaning an overall increase of 2-3% per year.
  • Switching to a fixed rate
  • Further protection is offered by French law so that, should you take a variable rate mortgage, you will always have the option to call your bank and switch to a fixed rate for the rest of the term.
  • Please be advised that if you make this switch, you may have a penalty to pay and you will not be able to switch back to a variable rate mortgage.
  • Good levels of security
  • These extra features offer peace of mind to the prospective borrower in France but do vary from bank to bank.
  • It is important to get to the bottom of these features when comparing the different offers in the market.

APPLYING FOR YOUR EQUITY SWITCH MORTGAGE

  • Following the changes in the mortgage application process of certain EU countries, obtaining a mortgage in France is no longer harder to do than in its neighbouring countries such as the UK.
  • Of course, the French are still very protective over the financial markets, including those relating to French second home mortgages products but in many ways this is why it is possible to source such favourable rates over such long periods.
  • This security means however that non-status lending and self-certification mortgages are not available.
  • Each of the French banks has a slightly different underwriting criteria and so requires a slightly different set of supporting documents.
  • Some banks may also require documents to be certified by a finance or legal professional – we will advise accordingly based upon your own personal circumstances and French property project.
  • In the case of an Equity Switch, you will need to show all of the new property purchase documents from the overseas country.
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CURRENT INTEREST RATES

  • Click here to view the latest interest rates available for overseas clients
  • Note that specific rates may apply to ‘Equity Release’ mortgages – please enquire within.

 

The Euro Interbank Offered Rate (EURIBOR) is a daily reference rate, published by the ‘European Money Markets Institute’ based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market).

It is used to determine the rate at which French banks and institutions lend money to each other.

Most French banks who offer a variable rate mortgage take the “Euribor 3 month” index number and add on their own margin.

The overall rate charged to a client is thus: the base rate at the time plus a margin: current examples for 2019: for one month (+ 0.9), three months (+ 1.2), six months (+ 1.6) and 12 months (+ 1.9) – each bank sets its own levels of rates charged.

COUNTRIES WHERE YOUR NEW PROPERTY MUST BE

  • United Kingdom
  • France
  • Germany
  • Austria
  • Belgium
  • Denmark
  • Spain
  • Finland
  • Finland
  • Greece
  • Irland
  • Italy
  • Holland
  • Poland
  • Portugal
  • Sweden

AVAILABLE COUNTRIES