French Property Mortgages

This is the first in a series of articles relating to the ‘French property mortgage’ market in France.

If you are looking to buy property in France you need to consider the mortgage market seriously. In our experience, rushing out and buying a home is fraught with danger. However, until you decide on where to live in France, what type of property to buy and, what type of mortgage to take use, you can rent a French property for as long as you like.

Fixed and variable rate mortgages are available to buy property in France, but it is worth considering, that the French market for these products is vastly different to that in the United Kingdom.

Interest only mortgages are available, but the criteria for obtaining such a product, is extremely high. Therefore, not many non French residents qualify for this type of mortgage.

The majority of French property mortgages are based on a variable interest rate, which is similar to a UK tracker mortgage. However, although variable, most banks offer a fixed rate for the first 3-12 months, sometimes with rates as low as 3.5%. For the remainder of the mortgage term, the interest rate will be on a fixed margin above the Euribor, which stands for the Euro Inter Bank Offered Rate. This is the rate at which European banks borrow from each other for a fixed period, 3, 6 or 12 months.

The margin, which the bank adds to the Euribor figure when calculating the amount it charges, is usually between 1.1 and 2% above the Euribor. However, this will depend on the mortgage company you are talking to, and on the odd occasion, 0.7-1% may be offered.

Fixed interest rate mortgages are available in France for property purchases, but unlike the UK, rates start higher and are fixed at one rate for the entire mortgage term, because of this, early repayment penalties will be put in placed.

The advantage of having a variable rate linked to the EURIBOR is that your bank cannot keep your payments high, if general money markets fall in Europe - the bank can only charge their set margin above the current level of the EURIBOR.

You are advised to seek professional financial advice before committing yourself to a mortgage in France or the United Kingdom. All facts and figures quoted in this and subsequent articles relating to this subject are indicative only. Until you have found, committed yourself to and purchased your property in France, remember you can always rent long term.

By Alan Tyrrell