Hidden fees and confusing T&Cs may cost more than you bargained for, so seek advice from a French mortgage broker, says Felicity Sullivan
You’ve just viewed the French property of your dreams. You are keen to make an offer but want to finance part of the purchase through a French mortgage. The clock is ticking in order to secure the house; however, you want to ensure you are making the right decision from a French mortgage perspective.
This is particularly important because, in France, unlike in the UK and other countries, it is much more costly to remortgage. And this is why remortgaging doesn’t really exist in the same way in France as it does elsewhere in the world. For that reason, it is critical that you pick the right French mortgage product and understand the different elements that impact the overall cost of a mortgage.
The most straightforward way of ensuring you have chosen the most suitable product is to use the services of a good French mortgage broker. For now though, here are some of the extra fees and unexpected costs you should be aware of:
- Interest rates – These determine part of your monthly repayment. There are typically three options: variable rates, capped rates and fixed rates. French mortgage rates are currently at a historic low.
- Life insurance costs – French lenders will require you to take out a life insurance policy to clear the mortgage balance in the event of your death. This will form the second part of the monthly cost. Some lenders will allow you take out a UK policy or may offer a total exemption.
- Lender’s arrangement fees – These vary from lender to lender. However fees start from €750 and go up to 1% of the loan amount. For larger mortgages, the arrangement fee may be capped and the borrower often has the option to pay the arrangement fee over a period of 12 or 24 months.
- Redemption penalties – Should you wish to repay your French mortgage early, redemption penalties may be payable. This is typically the case with fixed rate mortgages. Variable and capped rate products don’t generally have redemption penalties as long as a minimum of 10% of the original loan amount is repaid. Redemption penalties range from six months’ worth of interest to 3% of the outstanding balance.
- French mortgage broker fees – A commitment fee and/or a completion fee may be charged by the French mortgage broker, depending on the complexity of your application. However a good French mortgage broker will give you access to discounted interest rates, lender arrangement fees and competitive life insurance options. For that reason, it is more cost-effective to source your French mortgage through a good broker than by approaching the French lenders directly.
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French Mortgages: Frequently Asked Questions>>>
Originally published in issue 122 of FrenchEntrée Magazine