What is the news regarding French mortgage deposit losses?
The French supreme court, la Cour de Cassation, has confirmed rules regarding deposit losses for French mortgage applications.
Can you provide more information on French mortgage deposit losses?
Yes. If your offer for a property in France is accepted, both parties will then sign a conditional purchase agreement, known as a compromis de vente or a promesse de vente. If the buyer will be purchasing via a mortgage, the buyer must include the details for the mortgage that they are applying for in the conditional purchase contract (compromis or promesse de vente). The information specified normally needs to include the maximum mortgage amount, the maximum mortgage term in years or months and the maximum mortgage interest rate. This court judgement confirms that if a buyer applies for a mortgage that exceeds the criteria detailed in the contract, and if the buyer does not obtain a mortgage offer, then they normally have to pay 10% of the property value to the seller as compensation.
Do you have experience of this?
Yes, many potential property buyers, especially foreign buyers, make huge mistakes regarding this. Sometimes the buyer will not even mention that they need a mortgage, because they have “pre-approval” and they wish to hide this fact from the seller, as cash-buyers are often seen to be more attractive. However, this is a huge mistake because pre-approval is not binding in France and the bank can still refuse the mortgage right until the last minute, until a binding mortgage offer has been issued by the bank. Sometimes, even if you apply for the correct mortgage, the seller will still try to keep the 10% deposit if the mortgage is refused, if the mortgage refusal is not given in writing or email by the bank. This is extremely important because if a mortgage is refused at the first stage, in other words: by the banker before it has a chance to be studied by a mortgage underwriter or credit analyst, then all you are likely to get is a telephone refusal. If this happens to you, you must tell the banker to provide this refusal in writing, and sometimes they will refuse because they haven’t technically refused the mortgage and are just refusing to process it, because they think it will get refused anyway or they are too busy. You must keep an electronic or paper trail that you have applied for the mortgage amount that you applied for.
If pre-approval doesn’t exist in France, then how do I know if I will get a mortgage?
The closest to pre-approval in France is known as a simulation or similation personalisée. This is based on what you tell your banker about your income and main financial commitments (mainly, existing debts, rent payments if you plan to continue renting after the purchase, and any child support or divorce related pensions, known as pension alimentaire. Credit checks are not performed at this stage and few documents are likely to be studied at this stage besides payslips and tax returns. The simulation comes in the form of a mortgage and life insurance quote and will usually be given in a two or three page PDF document. Sometimes, this document is called an accord de principe, but this is rarer. In areas with high demand, some sellers will insist on this document before they even let you visit their property. If it is not possible to obtain this document, then sellers will often accept a written borrowing capacity estimation from a French mortgage broker.
How can Aisa International France help you regarding French mortgages?
We can guide you through the French property purchase process and possibly introduce you to a bank or French mortgage broker. Feel free to contact us here. If you would like to find out more about this subject, we have previously written about it here. We have also published an introduction to French mortgages here.
The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. Additionally, the author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, this article is dated and is based on legislation as of the date. It should be noted that legislation changes, but articles are rarely updated. Sometimes a new article is written; so, please check for later articles. Additionally, check for changes in legislation on official government websites. Finally, this article should not be relied on in isolation.
