QUESTIONS AND ANSWERS

How Much Can I Borrow?

Most banks will lend 85% of the price including the Estate Agency Fees, with some lending 100%, plus the purchase costs.
Currently, all mortgages are status mortgages, meaning that the banks will look at your income and outgoings. Banks will allow you to spend up to a third of your gross monthly income, less any existing monthly repayments on loans. They will also take a proportion of existing and future rental into consideration.

What Are the current French Mortgage Rates?

The rates are generally 1-2% lower than UK interest rates. The Euro Interbank Offered Rate (EURIBOR) is used as the base rate, and generally there will be a margin of 0.5%-2% above this.

What is the Mortgage Application Process?

The process of receiving an offer can take anywhere from a few days, to two or three months depending on when you produce your documentation and how quickly we can achieve final approval from the bank.

Once you have decided on your French mortgage, you will need to send us the required supporting documentation. When the bank has a complete file, they will send you a final simulation, before sending the file to their lending committee for approval, before the loan offer is made.

Upon receiving the offer, you must wait a minimum of 10 days before sending it back – “a cooling-off period”. You have one month to accept the offer. After you have accepted the offer, it is valid for up to eight months depending on the bank. You must complete the purchase of your property during this period. Extensions can be obtained in

What is the Euriobr?

The Euro Interbank Offered Rate is the rate at which French banks and institutions lend money to each other. This is usually the base rate at the time plus a margin: for one month (+ 0.1), three months (+ 0.2), six months (+ 0.3) and 12 months (+ 0.4). Most French banks with a variable rate base their rate on the Euribor 3 month plus their margin.

Check online at the Euribor- European Banking Federation

What are the terms invloved in getting a French Mortgage?

The bank will charge a set-up fee, and will require you to take out their life assurance too. This varies from bank to bank. There is also “frais de garantie”, a mortgage registration tax which varies from 2% for lower priced properties to 1.25% for those in a higher bracket.

Some banks will arrange an account for you, while others will expect you to do it yourself. Your ICE Finance consultant will advise you on this, and help you set one up if necessary.

All the costs above are laid out in our Mortgage Information sheet – which you receive with your quote from Athena Mortgages.

How Can I Secure the Rate?

In order to secure the rate that you have been quoted, it is necessary to send us all the required documents for the loan application. Upon receipt we can forward them to the bank that day, and reserve the rate for you. Rates can change twice per month so speed is essential.

Can I Borrow If I am Self-Employed

Yes. There are several ways to present the information to the bank – your consultant will find the best option for you. Please see the required documents for self-employed borrowers and contact us with any queries.

Check the list of required documents to apply for a French mortgage

 

What Are The Advantages of a French Loan?

In general, the rates are 1-2% lower than comparable UK rates, and the interest on French loans is tax deductible. For investment purposes it is better that the exchange rate risk from sterling to Euro is on the monthly repayment, rather than the whole value of the property.

What Options Are There For Making International Payments?

Most people will just ask their bank to transfer their money to an overseas bank, but probably aren’t aware that there is a way that they can achieve a better exchange rate, and could make significant savings.

We’ve partnered with World First to offer an international payments service that could save you up to 4% of the amount being transacted. There are various other benefits to using this service over your bank too – low to zero fees, exceptional customer service and faster payments.

Visit our international payments page to find out more.

 

What are the Early Repayment Penalties?

With a fixed rate loan the repayment penalty will be no more that 3% of the amount you are paying off early. There are generally no repayment penalties for variable rate loans. Please check this on your mortgage offer.

Payment Options during Construction of a Property

Most banks will offer the opportunity for you to pay interest only on the sums drawn down by the developer during the construction. Some banks will offer the opportunity of deferring all interest payments on the drawn down sums, and the addition of these sums to the loan amount. In effect, interest is accrued on the sums used by the developer, but the borrower does not pay them. These sums are added to the final loan amount. During this period the borrower will still pay life insurance. This period can last up to 36 months. Full payments can be deferred until the borrower receives rental income from a buy-to-let or leaseback.

Can I Defer my Payments?

We can generally arrange a payment holiday for up to three years. During this time the interest on the loan is accrued but not paid. Life assurance payments will be required during this time.

What is Non-Resident Income Tax?

Income tax liability of 25% is charged for French non-residents, who are members of the EU. This liability can be offset against:

  • Purchase costs
  • Furniture
  • Loan Interest
  • 80% of value of property

It should be possible to avoid paying any French income tax, over a period of 20 years, as a non-resident – depending on how the purchase is structured.

 

What is the Capital Gains Rate?

19% is the CGT taxation rate + social charges of an additional 17.2% = 36.2% in total. Since august 2012, this total tax is applicable to all nationals, whether resident or non-resident in France. Taper relief is given over the life of the property ownership: the CGT liability reduces by 6% a year, from years 6-22, so is effectively nil after 22 years of ownership. To be exempt 100% from the Social Charge would take a total of 30 years of ownership.  But please confirm your tax situation with a qualified taxation advisor.