French Property Mortgage

Many financial institutions in France offer loans, but it is mainly the banks that provide long-term (mortgage) finance. Some important features of a French loan:

• Interest rates in France are historically lower than those in the UK and attractive Government subsidies can apply to the purchase of a main residence. These loans are difficult, but not impossible, to obtain. However, if you accept a subsidy loan, you undertake to live in the premises for eight months a year. This in turn means you become legally domiciled in France .
• Interest rates are generally fixed for the whole term of the mortgage.
• Reversible rate mortgages are negotiable. This means that the interest rate is fixed for a period and then revised within certain boundaries. When interest rates are high this can be a good option.
• French financial institutions charge around 1% of the loan as an arrangement fee.
• Some borrowers may be eligible for a special savings (epargne logement) loan. These are below normal rates and do not require the purchaser to become domiciled in France .
• Loans can be negotiated in a number of different currencies. The US dollar, Swiss franc and German mark, and more recently, the euro, have all been seen at one time or another as advantageous to the borrower. This is partly speculative, and partly created by a market perception that some currencies are more stable than others.
• Security on the property will be required for all loans, which will never be for more than 80% of the purchase price. Premiums for life, health and disablement insurance are included in monthly repayments.
• You will not be sold endowment or pension mortgage packages by French banks. These do not exist in France .
• The law provides a 'cooling off' period (minimum ten days) after a formal loan offer has been received.

When checking current repayment rates of UK and French mortgages it is important to compare like with like. Take into account the term of years offered (normally shorter in France ) and add in insurances, arrangement and legal fees. UK financial institutions are coy about revealing the rates of commission they earn for setting up certain types of loans and mortgages, but sometimes these can add hundreds of euros a year to your payments.