French mortgages – frequently asked questions (FAQ)
Can non-residents obtain a mortgage from a French bank for property purchases in France?
Yes, but it has become far more difficult since the end of 2022 when interest rates began to rise and one of the major French lenders closed their non-resident business. Other lenders have also significantly reduced their lending to non-residents.
Are French mortgage interest rates fixed or variable?
The vast majority of French mortgages provided by retail banks are fixed for the lifetime of the mortgage. The average interest rate in December 2023 for a 25 year fixed-rate mortgage is approximately 4.5%. Interest-rates have fallen slightly as of January 2024.
Are French mortgages repayment or interest-only?
The vast majority of French mortgages provided by banks are capital and interest repayment mortgages. Except for those provided by private banks.
What is the maximum mortgage term in France?
Normally, 25 years unless you are purchasing a new-build or a property with a renovation project, in which case you can sometimes borrow for up to 27 years. However, since January 2024, some banks have started to offer 30-year mortgages to first-time buyers and those under 35 years old. The longer the term, the higher the interest-rate.
What is the maximum interest rate in France?
French lenders have maximum interest rates which they are allowed to lend at, these rates are set by the Banque de France. The rates differ depending upon the type of loan and the duration. The maximum rate is known as the taux d’usure and as of December 2023 it is 6.11% for fixed-rate mortgages of 20 years or more. These rates are reviewed quarterly and they are based on the overall percentage rate (nominal interest rate plus mandatory costs).
Update: for the first quarter of 2024, the maximum total interest rate for fixed-rate mortgages of 20 years and more has been increased to 6.29%. The average nominal rate for these mortgages in the last quarter of 2023 was 4.72%, but interest rates have fallen slightly as of January 2024.
Can you get pre-approval or a decision in principle for a mortgage in France?
Any kind of pre-approval or decision in principle is non-binding and for this reason, many banks actually avoid all words similar to decision in principle (accord de principe) or pre-approval. Credit scores are far less important in French banking, and in many cases the bank won’t ask for your credit score or report at all, so obtaining a pre-approval based on your main financial details and your credit score doesn’t really exist. The closest thing you can normally obtain to a decision in principle or pre-approval is a personalised mortgage quote and calculation, known as a “simulation personalisée”. Many sellers will also insist upon a “simulation personalisée”, or a letter from a mortgage broker, before they sign any conditional purchase agreement with you and some will even ask for this before you visit their property.
Is it possible to remortgage in France?
Remortgages are rare in France and often take the form of a renegotiation of the interest rate. If you wish to increase the amount of the outstanding debt, or obtain a mortgage on a property that you already own, the bank will be very interested in what you plan to do with the new funds and if you plan to use the funds as a deposit for another mortgage then the application will almost certainly be refused.
It is sometimes easier to “remortgage” if you have at least one other French debt as the bank can do the remortgage in the form of loan consolidation, called a regroupement de crédits.
You can also obtain a personal loan, technically called a crédit à la consommation, but often known as a prêt travaux when it is for a renovation project. However, these are limited to 75,000 euros and the maximum borrowing term is 10 years.
Is lifetime equity release available in France?
Yes, but the criteria is strict and a lifetime equity release mortgage is harder to obtain if you do not have French nationality. These loans are not available to non-residents. A lifetime equity release mortgage is known as a “prêt viager hypothécaire” in France.
An alternative to a lifetime equity release mortgage in France is to sell your property in the form of a viager contract. This is where you sell your property, usually in return for a lump sum and/or income, but you maintain the right to live in it for the rest of your life.
Can I obtain a mortgage as a self-employed individual in France?
Yes, but most banks will require three years of French tax bills, known as avis d’impôt sur le revenu.
How do private bank mortgages differ in France?
If you have a deposit of usually at least 500,000 euros, especially from 1,000,000 euros, then you may be able to obtain a mortgage from a private bank in France, Monaco and from other countries in Europe. Private banks usually prefer to offer variable rate interest-only mortgages for up to 10 years, but traditional mortgages are also available. Exceptions are sometimes made for clients with significant liquid assets or very high future earning potential.
Can French banks lend for properties in other countries?
This is extremely rare and not usually possible, besides from some private banks who can lend for properties in prime European locations.
How many multiples of my income can I obtain as a mortgage from a French bank?
French bank lending does not work like that, the bank calculates your lending capacity by limiting the total cost of all of your lending and financial commitments to 35% of your taxable income. This is usually your gross income, minus social charges (prélèvements sociaux), but before income tax. There are some exceptions, notably for first-time buyers. This 35% includes the cost of the new mortgage but it excludes most small direct debits such as mobile phone contracts.
What loan to value do French banks lend to?
Up to 100% of the property price for residents of France, usually with either a full-time permanent French work contract or with three consecutive years of stable French self-employed income. However, the banks will rarely finance the purchase costs associated with the purchase, so you should still have a 9-10% deposit to pay for the mortgage and property transaction costs. The banks also want to see some funds left after the purchase, especially if you are self-employed.
For non-residents, banks will lend up to approximately 80% of the purchase cost, but 70 or 75% is more common. Most private banks will require a deposit of at least 50% of the property price, but some will accept 30%.
Can mortgages be used to reduce liability to the French property wealth tax?
In some circumstances, yes. We recently wrote about this subject here.
Any other tips?
Your mortgage application should be kept as simple and as low-risk for the bank as possible. Planning to purchase a dilapidated chateau in order to renovate it and turn it into a wedding venue? It is very unlikely that a bank will accept this project.
Many people become frustrated by the French mortgage application process and whilst it is true that some of the refusals are hard to understand, you should always remember that if you applied for a mortgage from a bank in an English-speaking country with a bunch of foreign tax returns and other foreign documents, then you may also struggle to obtain a mortgage.
At Aisa International, we currently only have access to mortgages from private banks. Feel free to contact us to discuss your mortgage project in more detail.
Useful links:
- https://www.service-public.fr/particuliers/vosdroits/N20373
- https://www.service-public.fr/particuliers/vosdroits/F16242
- https://www.economie.gouv.fr/facileco/regroupement-credits-rachat-credits
- https://www.service-public.fr/particuliers/vosdroits/N96
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.
