In the first of our three part guide to French mortgages, we are going to provide an overview of the processes involved in arranging a mortgage to purchase a French property.
a. Do your homework
If you are considering purchasing a French property using a French mortgage, there are two options. You can approach the French banks directly or you can use the services of an independent French mortgage broker. Each of the French mortgage providers has different lending criteria and different types of mortgage products. This means that you may not qualify to borrow money from all the banks, particularly if your circumstances differ from what French banks consider the norm – such as being self-employed or being tax resident in a non-European jurisdiction. Likewise, the range of products available to you may be limited.
An independent French mortgage broker will provide you with access to the entire market and will be able to find the most suitable mortgage product for your circumstances. A broker may also provide you with access to discounted rates and products that are not available when approaching the lenders directly. Re-mortgaging in France is far less common than you may be used to in your domestic market and one of the main reasons for this is that it costs significantly more to do. It is therefore important you select a suitable French mortgage product that you will be happy with for the duration of the loan.
b. Obtain an agreement in principle
Before you start your French property search, it pays dividends to obtain an agreement in principle (AIP) for your French mortgage. The advantage of this approach is that it will provide you with an idea of how much you will be able to borrow and peace of mind that you have the funds in place to complete the purchase. It will also show property vendors that you are serious in your search. This will put you in a strong position to negotiate on the property once you have found it, particularly as you are in good shape to complete quickly as you will already be well advanced in the French mortgage process.
c. Sign your compromis de vente
Once the purchase price of the French property has been agreed, you will need to sign the compromis de vente (sales contract). If you are purchasing the property using a French mortgage, you may wish to have a clause suspensive inserted into the sales contract. This will ensure that if you are unsuccessful in obtaining your mortgage approval, you will be in a position to pull out of the purchase without putting your deposit at risk. You do however need to be aware that some vendors may be cautious about committing to a sale where a clause suspensive is included in the sales agreement, particularly if there is competition from another buyer who is happy to commit without this requirement. To avoid this eventuality, you may want to consider obtaining an agreement in principle from a French mortgage provider as outlined above.
d. Have your mortgage offer issued
Once you have signed the compromis de vente, your mortgage application has been approved and the valuation of the property has been completed by the lender, it is time for the mortgage offer to be issued. It is only when the mortgage offer has been issued that the exact rates and terms of your offer can be confirmed. One quirk of the French mortgage process is that under French law once your French mortgage offer has been issued, you will need to adhere to a mandatory 11 day cooling off period. This cooling off period starts on the day that you receive the mortgage offer, and the signed offer can only be returned after 11 days. If you try and return the offer before this 11 day period has expired, the mortgage offer will need to be reissued and the 11 day cooling offer period will start again. It is also important that the offer is correctly completed and signed as this too could cause the offer to need to be re-issued.
e. Completing the purchase
After the offer has been returned to the mortgage provider, your notaire will be in a position to request the funds from your lender, subject to all of the other paperwork and documentation being in place. Once all of the funds have been received by the notaire, they will be in a position to complete the purchase. You will either need to sign the final documents in person or arrange for your notaire to do this via power of attorney (which will need to be arranged in advance). Arranging a French mortgage to complete the purchase of a property in France will normally take around three months from start to finish. The process can be completed in a shorter time frame than this, however it is important that you give yourself sufficient time to complete everything as required. Should you choose to use the services of a good French mortgage broker who can manage the process for you and liaise with all of the third parties involved, you will give yourself the best possible chance of completing the transaction to your deadline.
Please click on the following link if you’d like more information on how to Apply for a French Mortgage