France is an ever-popular destination for buyers. It is not hard to see why – from Paris to the Alps, the country provides a diverse range of properties and its 13 regions each boast their own unique appeal. France has a contrasting climate and rich cultural heritage. Lovers of the good life are spoilt for choice: with its artistic cities, sleepy villages, lush countryside, enchanting coastline, celebrated cuisine and fine wines.
Most people will purchase a permanent or second home in France with a mortgage. There are two main mortgage options: borrow in your own country, through specialist lenders for overseas properties or by remortgaging with your existing lender; or obtain a mortgage in France through French banks or French mortgage brokers. Inevitably there are both advantages and disadvantages to these options and you should always obtain professional advice from a qualified mortgage adviser to review your own situation.
With a number of mortgage products on both the French and overseas markets, choosing the right one for your financial and personal circumstances is an important decision. While most mortgages are Repayment, French banks are increasingly offering Interest Only options. The duration of the French mortgage plan varies from 5 to 30 years and deposits range from paying as much as possible to in certain circumstances nothing – 100% mortgage. Most French mortgages will allow you the choice of either a fixed or a variable rate mortgage.
Another consideration is whether you intend to develop the property for rental purposes. With an increasing number of leasehold and Buy-to-let mortgage options on the market, French lenders are seeing the profitability of such an investment. If buying a property to rent is part of your plan, you should be aware that a French mortgage would allow you to offset the interest on your mortgage payments against the rental income for tax purposes which would not be possible if you raise the money by remortgaging on your UK property. If you plan to rent your French home for income check that a UK based lender will allow this as part of a remortgage. For more information see our Buy-to-let mortgage options section. Equity Release mortgages are also becoming more popular as the majority of homeowners assets are tied up in property and people are retiring earlier and living longer.
At FrenchEntrée we can help you find your dream property and the right mortgage deal for you. Before proceeding with your property search, why not contact one of our French mortgage specialists so that you can continue your search in the confidence of knowing exactly how much you can afford.
Euro or sterling mortgage?
If you live in the UK and your earnings and savings are in sterling, it is important that you are aware of the current currency exchange rate when buying a property in France. See how can a buyer avoid the negative impact that these fluctuations can have in the final price for their property by fixing the exchange rate in advance. If in the future you decided to sell the house and convert the proceeds back into UK pounds, at that moment in time the financial return you see will depend not just on the French housing market in your chosen region but also on the exchange rate at the point of sale. This could work in your favour, but it is important to remember that there is a risk of the currency rate working against you and any gain on the property value might be lost on the exchange rate. Equally if the exchange rate is positive it might offset any property losses. When deciding where to borrow, you should consider such currency implications.
If you borrow a sterling mortgage to buy a French property which is paid for in Euros, you could find that you have a liability to pay a fixed amount (Sterling mortgage) for a declining value asset (French property) if French property values were to decrease. On the other hand, if you choose a French bank mortgage (payable in Euros) and you earn your money in the UK, you will be faced with the unpredictable currency market when converting money to make payments. To counter this dilemma it is possible to buy currency at a fixed rate for several months ahead, and therefore budget more confidently. See our Currency Zone.
It is worth comparing French and UK lenders regarding the amounts payable in interest each month. In recent years, many buyers have found that taking a mortgage from a French lender is the most desirable option. With some mortgages, it is possible to change to an English mortgage at the end of a first term.
When acquiring a mortgage it is also important to be aware of the additional costs. See our FAQ page for further information.
Here at FrenchEntrée we have an experienced team of property and mortgage specialists who are able to assist you through the whole process from finding your perfect French home to buying your property with the right mortgage deal for your situation and circumstances. Our mortgage consultants can provide you with an independent assessment of your funding requirements: euro or sterling mortgages.
The next step
You can apply for a mortgage today here or for more information about French mortgages visit our Mortgage Zone >>>
French Mortgages: Frequently Asked Questions>>>