When looking at property in France, often the deals that stand out the furthest, in terms of their value for money, are those in which the new home requires renovation works. For those of you who are enthused by the idea of such a property renovation project, let’s take a quick look at the main factors to bear in mind if you choose to finance it with a French mortgage.
As ever, when seeking financing in France, bear in mind that French banks are often the only lending institutions which will take a mortgage charge against domestic properties. However, banks won’t provide financing for a property which they deem to be uninhabitable which, broadly, means those without mains electricity, running water, central heating, windows, doors or a roof. To apply for the French mortgage, the bank will ask you to prove that you’ll carry out works to make the property habitable. This involves submitting formal estimates for all the renovation works to the bank, as part of the mortgage application. The estimates must be from registered French builders, whose insurance documents will also be needed as part of the process.
This is a key point that sometimes wrong-foots British buyers – French lenders won’t allow you to carry out the renovations by yourself or employ British builders of your choice.
With respect to the mortgage size itself, most lenders will stick rigidly to a maximum loan-to-value (LTV) ratio of 80% or 85%. This figure relates to the total cost of your project – that’s to say, the purchase price plus all the renovation costs. Furthermore, the bank will carry out a survey to establish an estimated final value of the property once all the works are complete. The LTV restriction also applies here, so the final loan size mustn’t exceed 80% or 85% of this estimated final valuation.
As you approach the completion of your purchase, the mortgage funds won’t immediately be released when your new home is signed over. Instead, the bank will require your entire personal contribution (the ‘deposit’) then contribute the funds needed to complete the purchase itself. The bank won’t provide anything relating to the renovation at that stage, these funds are only sent out once the works themselves have been completed. Upon completion of the works, the builders’ invoices should be forwarded to the bank, which will reimburse them directly. For this reason, do check whether the bank charges a commission d’engagement, which would result in you paying interest on ‘undrawn’ renovation funds.
You’ll have gathered that arranging a renovation mortgage in France isn’t straightforward. As always, a reputable, independent French broker will be able to compare the market on your behalf and advise you on any matters which haven’t been fully explored herein.
Please click on the following link if you’d like more information on how to Apply for a French Mortgage