Buying properties in France using a French mortgage

Most overseas buyers who need to borrow to buy properties in France raise the capital against their property in their home country. This allows them to borrow without putting their main home at risk when buying, for example, a holiday cottage in France. However, people are increasingly turning to a French mortgage as a means of securing finance.

How do French mortgages work?

If you are buying any properties in France by borrowing money you should consider whether a French mortgage is right for you. The maximum loan-to-value amount lenders offer will typically be lower than in the UK. Banks will normally loan between 65 to 85% of the value of the holiday cottage in France that you fancy and you would need to find the remainder yourself.

French law requires proof that the borrower can afford the repayments so self-certificate mortgages do not exist. French mortgages work on the basis that the total of all mortgages and loans held by the borrower do not exceed one-third of their income. Therefore, the monthly repayment sum of a UK mortgage would be taken into consideration when trying to fund the purchase of properties in France in this way.

Paying the mortgage on your holiday cottage in France

French mortgages usually run for between 15 and 25 years, depending on the sum borrowed and the bank offering the loan to buy properties in France. Most commonly, this will be a repayment mortgage although the range of products offered by French mortgages is slowly expanding. Interest-only options for part of the loan are now being offered by some lenders.

French mortgage lenders offer both fixed rate and variable rate loans with the former type based on the Euribor (European Inter Bank Offer Rate). Fixed rate mortgages on properties in France are generally more expensive but offer greater stability.

Disadvantages of buying properties in France with a French mortgage

The set-up costs associated with a French mortgage are higher than in the UK. Whilst the range of French mortgage products on the market has grown over the past few years it is still fairly limited.

There are also currency issues involved with borrowing money in another currency. Exchange rate fluctuations can impact greatly on the cost of your holiday cottage in France, making it far more expensive than originally planned.

However, France has enjoyed historically low interest rates and specialist currency advice can help minimise this danger. Securing a French mortgage against properties in France means any UK property owned by the purchaser is not put at risk.

Other information concerning French mortgages

Before agreeing to mortgages, most banks will insist on survey being carried out on properties in France. The cost of this will depend on the value of the property and bank charges can amount to a further 2% of the purchase price of your holiday cottage in France.

Banks will normally insist that buyers take out life and buildings insurance before agreeing to a French mortgage.

Before committing to buy a holiday cottage in France think carefully about whether a French mortgage is suited to you. It may be that UK and International mortgages are more suited to your needs and offer you the best chance of securing properties in France.