French Mortgage in 2023/2024

Purchasing a property in France, whether it’s a ski property, a chic apartment on the Côte d’Azur, or in Paris is a dream for many. However, navigating the French mortgage market can be a complex endeavour. In 2023, while the world may have changed, the fundamentals of obtaining a French mortgage remain relatively constant. This article will guide you through the steps and requirements to secure a French mortgage in the year 2023.

Understanding French Mortgage Types  

Before delving into the process, it’s essential to comprehend the types of mortgages available in France. 

• Fixed-Rate Mortgages: These offer the security of a constant interest rate throughout the loan term.  
• Variable-Rate Mortgages: Interest rates fluctuate based on market conditions. They usually start lower than fixed rates but can increase over time.  
• Interest-Only Mortgages: Borrowers pay only interest for a set period before repaying the principal. Banks would usually ask for an investment as security. 
• Mixed Mortgages: A combination of fixed and variable rates, providing a middle ground between stability and flexibility.  

Eligibility and Documentation  

To qualify for a French mortgage, you typically need. 

• Proof of identity (passport, birth certificate etc.)  
• Proof of income (payslips, tax returns, employment contracts)  
• Bank statements  
• Proof of down payment  
• Proof of property purchase (purchase agreement)  
• Calculate Your Budget: Before you start looking for a property, determine your budget and how much you can afford to borrow. French lenders typically cap the mortgage monthly repayment at 33% to 40% of your monthly income. 

*It is essential your financial documents are up-to-date. 

Choosing the Right Lender

Banks offer mortgage products, but it is wise to compare multiple lenders with a Mortgage Broker, to find the best deal. Consider factors such as interest rates, fees, and customer service.  

Loan-to-Value (LTV) Ratio

In France, the LTV ratio is the percentage of the property’s purchase price that you can borrow. Generally, you can get up to 85% LTV, but a larger down payment can lead to better terms.  

Interest Rates 

Interest rates vary between lenders and mortgage types. Fixed rates are currently popular due to their stability, but it’s essential to monitor market trends and consult a mortgage broker to determine the most suitable option for your situation.  

Mortgage Insurance

In France, mortgage insurance is often required, especially if your down payment is less than 20%. This insurance protects the lender in case of default. Be sure to factor in the cost of mortgage insurance when budgeting.  

The Application Process

Once you have chosen a lender and mortgage type, you will need to complete an application. The bank will review your financial documents and assess your creditworthiness. This process can take several weeks.  

The Notary and Legal Process

In France, property sales must be completed through a notary. The notary ensures all legal requirements are met and registers the sale. You will sign mortgage offer, the property deed and power of attorney at this stage with a view to complete the purchase.  

Repayment and Taxes

French mortgages typically have a monthly repayment schedule. Keep in mind that you will need to pay property taxes, insurance, and maintenance costs in addition to your mortgage payments.  

Conclusion

Securing a French mortgage in 2023 is an achievable goal with the right preparation and knowledge. Understanding the various mortgage types, eligibility criteria, and the application process will help you navigate the complex French mortgage market successfully. Remember to consult with a mortgage broker and conduct thorough research to find the best mortgage option that suits your needs and financial situation. With careful planning, you can turn your dream of owning a piece of France into a reality. 

Case study 

Let us consider a French buy-to-let investment in the beautiful French Riviera, specifically in the NICE area (see the property here). In this example, we will look at a 1-bedroom apartment as the investment property.

Property Details:

• Property Type: 1-bedroom Apartment  
• Location: Nice – St Laurent du Var, French Riviera  
• Purchase Price: €380,000  
• Down Payment: 30% (€114,000)  
• Mortgage Amount: 70% (€266,000)  
• Mortgage Interest Rate: 4.5% fixed  
• Mortgage Term: 15 years  
• Mortgage Repayments: €2,035 p.m. 

Monthly Income and Expenses:

• Rental Income: In the French Riviera, rental income for a 1-bedroom apartment can vary depending on the exact location and the time of year. During the peak tourist season, you might expect to rent it for €1,500 per week, while off-peak rates could be around €900 per week. On average, let’s assume you can rent it for €1,200 per week.  

• Property Management: You may choose to use a letting agent/property management company to handle guests check-in, cleaning and maintenance. Professional fees can range from 15% to 25% of the rental income. In this example, let’s use 20%, which is €240 per week

• Property Taxes: Property taxes in the French Riviera can vary based on the exact location and property size. On average, you should expect to pay around €1,000 per year, which is approximately €83 per month, for a 1-bedroom apartment.

• Service charge, Maintenance & Utilities: For a 1-bedroom apartment in Nice, this should be around €150 per month.

Annual Cash Flow Calculation – Average:

• Rental Income 20 weeks/year = €24,000  
• Personal Use: 32 weeks/year 
• Property Management Fee: – €4,800  
• Property Taxes: – €1,000  
• Service charge, Maintenance & Utilities: – €1,800  
• Mortgage repayments: – €24,420  

Annual Cash Flow:

• Rental Income (€24,000) – Expenses (€4,800 + €1,000 + €1,800 + €24,420) = – €8,020

Monthly Cash Flow:

• Annual Cash Flow (- €8,020) / 12 = – €668

In this example, the monthly cash flow is negative, indicating that the expenses exceed the gross rental income. This is common for short-term vacation rentals in popular tourist destinations in an average year, considering weeks of personal use available to the investor on a high 70% LTV mortgage. With a 50% LTV mortgage, the net monthly result would be neutral. 

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*Article last edited September 22, 2023