Frequently asked questions [FAQS's]

This section is designed to clear up any misconceptions and give you a clearer understanding of French mortgages. Should you need us to expand on any of the answers, please feel free to contact us - we are here to help.

How much can I borrow and how is it calculated?

Under French lending rules, French Law states that French lenders must "take into account the affordability of any proposed new mortgage lending".

In France, lenders must consider affordability very carefully due to French consumer law. It is therefore left to each lender to determine what is and what is not "affordable". You will therefore find varying information on how a lender assesses affordability. Some lenders base their lending criteria on 33% of gross income, others are based on net income etc.

The most common affordability criteria used at the time of your mortgage application must include the new proposed French mortgage monthly repayments, plus all existing financial commitments, other mortgage payments, rent, loan repayments, other ongoing contractual financial commitments (such as Maintenance payments). These must not exceed 33% of your total Gross monthly income (or, with some lenders a less generous 33% of Net income).

For joint income mortgage cases, the joint incomes are added together and each partner's, and any joint and individual existing financial commitments are included.

For clients who have earnings upwards of £75,000 pa, under special circumstances, it is possible to borrow up to 40%, where the client's financial profile shows its merited.

For people who are employed, "gross monthly income" means "before tax" income and where used, the term "net income" means "after tax" income. For self employed clients, a different income definition is used (normally involving an assessment and interpretation of the last 2 or 3 years' accounts, in particular the annual taxable net profits, backed up by personal banking records). For directors of limited companies, normally any salary and dividends (averaged out over 2 or 3 years) will be assessed (and possibly any balance left over in the Capital Account of the Company may also be used).

Verified gross or net income can also be assessed from any investment income, state and or private pensions, net rental income, maintenance payments received etc. State benefits will normally be excluded from income assessments.

Existing financial commitments do not include normal day to day living expenses - such as food bills, electricity/gas bills, petrol, Council Tax etc.

Therefore, each applicant is assessed on his or her individual or joint capacity to service the mortgage.

It is therefore imperative that we check and review your current financial circumstances by you completing the enquiry form for a decision in principle.

From what we have said above, if you already have a third or more of your gross monthly income going out on existing mortgages, loans etc., you are very unlikely to be able to raise a French mortgage. You should also question the affordability of any further commitments, as the conventional wisdom is that breaching the 33% rule would normally cause you financial difficulties.

Any potential letting income from the proposed French property is not normally considered, when assessing French mortgage applications. However, if borrowing to buy a property takes you close to the 33% barrier, letting the property will alleviate the burden and you should seek advice form our experienced and knowledgeable partners.

Lenders will not take "potential income" into account, for a number of good reasons. Your application must stand up on its own merits, without inclusion of prospective letting income. You are however, normally free to let the property if you wish.

Finally, remember that the overall amount you borrow is also in part related to your available deposit funds. If these funds need to be converted into Euro, please click here. If you are not already resident and taxed in France at the time of the application, you should normally be in a position to put down a minimum of 20% of the purchase price or 15% for cases where you intend borrowing above 75,000 Euro. For clients both resident and taxed in France itself at the time of their application, lower deposit levels are required than for non-resident borrowers. We can arrange mortgages of up to 100% if you qualify under the above income and affordability rules.

French mortgages for foreigners usually require a deposit of 15-20% minimum. If you do not have this liquidity available then you can apply for a loan for this deposit taking some equity out of your existing home - please apply for a secured loan here for the amount of the deposit required.

In addition, you will also need to have available the Notaire's fees (buying costs), which can range between 6-10% of the purchase price.

How long does it take to arrange a mortgage?

Normally, about 2 to 4 weeks for a mortgage offer although a decision or indication based on the financial aspects of your application can be obtained within a few days of the lender receiving your application from us.

It is also possible to make an application without a property in mind, to pre-qualify your application, so that when you find somewhere you to buy, your full mortgage application will be processed that much quicker, as the financial aspects of your case would have already been agreed.

The quality and accuracy of the information you supply will determine the speed with which the lender will process your application. We put considerable effort into this aspect and have a huge amount of experience in this area. Before proceeding, we will have fully briefed you on all the items required in conjunction with your mortgage application, so that you can plan ahead and collate exactly what you require in good time.

Can a non-earning partner or spouse be a joint applicant?

Yes, assuming the non-earner has not had any serious past credit problems.

How many people can apply on a mortgage application?

Subject to each applicants' own satisfactory past credit history and status, up to four unrelated applicants can apply together. If there were to be more than four applicants, then they need normally to be related or very closely connected to satisfy the lender.

The affordability criteria used for cases involving more than two applicants will be assessed differently to individual or dual applicants.

How do O.C.E.A.N. Finance and Mortgages get paid for their services?

We are paid, normally 1% by the French lenders for the mortgage business we introduce to them. The choice of lender will normally be determined by which French lender would be the more likely to accept an application from you, grant a mortgage on the particular property you are interested in or offer the most favourable terms to you.

We know the importance of recommendation, so it is within our interest to act in yours.

For all cases of € 75,000 or more our services to you are provided without any brokerage fee being charged. For mortgages below this figure we charge £250.00 to cover our expenses.

How many lenders does O.C.E.A.N. represent?

We currently represent twelve major banks and lenders. These have been selected mainly for reasons which include the quality of service, English-speaking staff, flexibility, ability to deal electronically with case feedback or issues arising from problems and speed of processing. Concentrating the majority of our business through these financial institutions enables us to influence decisions, when needed owing to the business volumes we place.

Will I have to pay any charges if my application was unsuccessful?

No. Please see our Terms of Business for confirmation and clarification of the basis upon which we act.

Are there any disadvantages regarding interest rates or terms if we use o.c.e.a.n. finance and mortgages?

No. In fact the reverse is often the case. We can save you money on good quality larger cases by improving on the standard terms and negotiating better rates, margins and arrangement fees. We are responsible for high levels of business with many French lenders and the influence to negotiate the best possible terms.

Do we need an appointment?

No. Everything can normally be done by post, phone, fax and e-mail

Can I derive an income from letting my property?

Yes, letting out the property for short-term holiday lets, several weeks at a time is fine with all our panel lenders. You should seek advice from our sister company. Letting for long periods requires a formal tenancy agreement and you would need to ask the lenders permission before creating any long term tenancy. You will need to check your buildings and contents insurance covers you during any third party occupation of the property, including short-term lettings. For buildings insurance please click here.

Do I have to have Life Assurance?

Yes. Life Assurance for all parties is a mandatory requirement to go with any mortgage - so that the mortgage would be repaid in the event of death within the mortgage term. Suitable existing policies are level or decreasing Term Assurance. (Endowment and Whole Life are not acceptable). The Life Assurance Company must also be on the approved list of the lender. The policy must also meet the lender's lending criteria for the Sum Assured, the term of the plan and all parties must be insured. The lender will require full assignment of the policy. If you do not have life assurance that meets these requirements please click here.

Our sister Insurance services are able to arrange suitable and cost effective cover, either with UK or International insurers or by arranging cover via the lenders' own block policy arrangements (where applicable).

Do locations or regions affect the type of mortgage I can obtain?

Yes, this is possible with some lenders. This may be relevant if you require a relatively high proportion of the purchase price on a mortgage (say above 70% of the purchase price in some rural areas/regions). In such cases, we will advise you accordingly. Some lenders have regional lending criteria, where both interest rates and terms available are directly dependent on area or location. Equally, some lenders have no such criteria and terms apply equally across all of mainland France.

Are there currency risks in taking out a French mortgage?

If your current income is paid in Euro then, of course, there are no risks.

If your income is derived in Stirling or any other non Euro currency then the following will apply:

Euro mortgage payments and the capital outstanding on your mortgage can change (upwards or downwards) in your own domestic currency terms, as will the value, in your domestic currency terms, of any French property. This risk can work both "for" and "against" you depending on currency trends and other factors.

For UK clients, if the UK finally joins the Euro, then such currency fluctuation would cease to be an issue.

Please also bear in mind that, as well any potential upside or downside currency risk, there are also other financial factors to consider.

For example: If you intend to derive an income from the letting of your French property (or you decide to do so in future). In such cases you would be able to offset the interest on a French mortgage against the French rental income for tax purposes. A distinct advantage for high rate taxpayers - especially the higher rate taxpayer in the UK and or US. You should seek advice from our Legal and Tax Advisors. The offsetting of interest paid is not possible with the interest due on any domestic re-mortgage or further advance or any other domestic loan taken arranged outside of France itself - even if it was wholly used to fund the entire purchase of the French property. The loan interest on such domestic borrowing could not be offset against the French income received from the property at all.

There is also the question of affordability. You need to consider how "affordable" your proposed borrowing on a French mortgage is and how it compares with any other available options. We can advise you on all aspects of borrowing.

Should your French mortgage repayments increase in currency terms by say, 10%, would the mortgage payment still be affordable for you to make? Would it still be competitive with other available options? If not, then clearly you should consider discussing our other financing options instead.

Finally, there are other risks to gauge and considerations to make, which are perhaps less to do with variations in currencies and more to do with your own peace of mind, when considering borrowing domestically as against borrowing abroad.

Is it prudent to increase your own domestic mortgage borrowings substantially on your own main residence opposed to the alternative of borrowing in France? Would re-mortgaging or other secured domestic borrowing secured on your main home add an increased risk of keeping that home in the event of sudden financial difficulties, redundancy, divorce or in the event of a major recession affecting your income? If that borrowing was secured in France itself against your second home, would that make it easier to financially safeguard your main residence?

Clearly, there are a number of factors to consider but it would be a mistake to think that local currency borrowing, as opposed to Euro borrowing on a French property asset, is completely or simply without any risks. It simply isn't the case, although the types of risk may be different in their nature. None of us can predict or may want to consider such a situation, but these things do happen, as we all know, and not always to other people.

We are here to advise you but at the end of the day, we would normally recommend you taking the path that you feel most comfortable with.

Appointing a solicitor or lawyer...?

Appointing a specialist solicitor or lawyer is not a strict requirement. However, unless you are very familiar with the French legal system and you speak French well, we would strongly recommend it. As part of the Where On Earth Group we benefit from having two legal teams conversant with buying property in France. If you are purchasing a property under 250,000 Euro please click here. If you are purchasing a property over this amount, you should also take tax advice along with legal advice. Please click here.

French Notaires do not normally give advice and are representatives of the French Govt. required to ensure they collect the taxes due. As such - they are simply there to ensure the transaction proceeds according to French Law. This is not the same thing as ensuring the transaction proceeds in your best interests or to explain things in detail to you. Many Notaires do not speak fluent English, so the potential for misunderstanding is paramount.

Considering a 'Leaseback' property?

Leaseback type purchases, where you propose to enter into the granting of a long term lease to a developer are only acceptable in certain cases. Broadly speaking, this is where the Developer is well known, has a good reputation and the property is located in certain regions of very high domestic demand (Paris, Cote d'Azure etc). Otherwise, lenders on our lending panel do not normally accept such cases.

Under a long leaseback arrangement, the mortgage lender, should they need to, cannot easily sell the property on the open market. Leasebacks are normally granted on new builds to reclaim French TVA. Lenders will normally not be interested in granting a mortgage on that type of arrangement - as such schemes adversely affect their mortgage security.

How do I pay my French mortgage?

You will need to set up a French Bank account (we can help you with this) and pay the mortgage with the French equivalent of a "Direct Debit" (Autorisation de Prelevement Automatique).

What is 'EURIBOR'...?

EURIBOR ( Euro Inter Bank Offered Rate). This is the interest rate at which European banks can borrow money (from each other) over a set period (normally 3 months). There are other EURIBOR indices for other timeframes - including 6 and 12 months. EURIBOR is the "wholesale" cost of borrowing money, as opposed to the "retail" cost of borrowing the money.

The significance of this interest rate index is quite simply that some lenders' schemes are linked to a particular EURIBOR index. It is common for French variable rate mortgage schemes to be reviewed quarterly, in line most commonly with the 3 month EURIBOR rate, but in some case with the 12 month EURIBOR rate.

On such schemes, in addition to the relevant EURIBOR rate there will be the lender's own set interest rate margin over and above EURIBOR (which might be 1.5% over 3 month EURIBOR).

In the UK, the equivalent of EURIBOR is known as "LIBOR" (London Inter Bank Offered Rate) - which is exactly the same kind of concept, although the current rates of EURIBOR and LIBOR at not directly related.

This type of interest rate setting has become more popular in the UK and similar schemes are referred to as "Base Rate Tracker" mortgages. Many clients prefer this type of arrangement, as you are not dependent on your lenders' discretion about the timing of mortgage interest rate changes. The lender can only charge the Index rate plus their set margin (the lenders' margin cannot vary during the life of the mortgage). Lenders cannot keep their mortgage rate artificially high for existing customers, if general money market rates fall. Many key UK lenders have been extremely quick to put their mortgage rates up in the past but then very slow to bring them down when money markets rates fall - using their discretion on traditional variable interest rate timing to maximise their margins. This cannot be done with a scheme linked to EURIBOR / LIBOR or to other similar money market indices.

Can I borrow the deposit I need for my French property against my existing.?

Yes. Providing you have enough equity in your property and providing this level of borrowing does not take you over the 33% threshold as mentioned above. You can borrow money in the UK against your home to pay the deposit on your French property. French mortgages for foreigners usually require a deposit of 15-20% minimum. If borrowing the deposit is within your interest and provides the liquidity needed to spend on home improvement. Please apply for a secured loan here for the amount of the deposit required

You are reminded to read and ensure that you understand our terms and conditions before entering into any agreement or contract.

O.C.E.A.N. Finance and Mortgages are the brokers best placed to help you arrange a mortgage in France with a large range of French lenders.

Our advice is free and we can save you time and money to ensure a smooth transaction.

O.C.E.A.N. Finance and Mortgages are part of O.C.E.A.N. the One Call Estate Agency Network and a subsidiary of The Where On Earth Group.

As part of The Where On Earth Group we can put you in contact with our sister companies who cover all aspects of buying a property in France and relocating to this beautiful country.

We can arrange your french mortgage for you.

Click here to get started.