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The financial arrangements If you are looking for a house through an estate agent, he will be more than happy to put you in touch with a lender and an insurer. This is usually a bank branch and the insurance agent in his network, so he'll receive commission on each loan or insurance policy sold through him. If you would prefer to skip the estate agent, or want a truly independent opinion on the most interesting offer, you will have to search for a loan and insurance yourself. Below, 'Buy property from the owner in France' offers an extensive translated extract of the financial pages from ‘La Maison' the book written by Dutchman, Wim Bavelaar. With this information, you will be fully prepared if you are looking for a loan for the purchase of French property. Who can you contact? There are various mediators, but it can difficult to determine what their position is. Some advisors have made it very clear that they work together with a bank. Others are estate agents who try to lure home buyers through giving advice on financing. But there are some real independent advisors. Confidential and reliable advice If you work with one of the advisors featured on this site, they can no doubt recommend you one or more trusted financial experts. You can be re-assured that this reference is completely un-biassed. The participants in the platform "Buy property from the owner in France" have mutually agreed not to accept commissions from each other or from any third parties. So you know exactly where you stand. Loan from a French bank Mortgage All banks offer the possibility of a property loan. For some time now the Post Office may also provide real estate loans. At the 600 post offices in bigger cities, advisors are available (consultants and specialists in housing). The post office does not have any handling charges. French brokers You might consider a broker (courtier). More and more people choose this option. A courtier seeks the best loan and receives his reward from the payment of the approximately 1% handeling fee (frais de dossier) that otherwise would have gone to the bank. Repayment and collateral The banks of course require a guarantee for the repayment of interest and repayment of the real estate loan. In many cases the loan must be repaid by the age of 75. It’s the law, that a foreigner who is not subject to tax in France, may only be financed up to 80% unless there are assets which can offer more assurance. Income counts! The main criteria for the banks giving loans is the ability of the debtor to meet future financial obligations, known as the ‘taux d'endettement’. You must proove that you can make the regular monthly payment, together with any other payments, as a rule not to exceed 30% of your monthly income. You must have a stable income in the form of a salary, pension or benefit from a continuous annuity policy. Another possibility is for the loan amount to be covered by capital. You will need to have a sufficient investment capital of at least the value of the property plus 40% for interest and costs. What papers will the bank require? The bank requires a lot of information from the borrower: copies of the deed or the ‘Compromis de Vente’ and for a renovation an estimate of the costs, the architect’s plan, building permit, construction contract and so on. Of course copies of pay slips or other proof of income. If the work has already begun, then often you will also need to supply copies of all bills paid. Bridging loan It is possible to take a short loan to in order to buy the house while the existing house has not yet been sold. Such a loan is called a ‘crédit relais’ and amounts to between 60 and 80% of the value of the house for sale. The interest rates for these loans are somewhat higher than that of the 'ordinary' real estate loans. Such a loan is usually only arranged if there is still a conventional loan in place with several years left. You borrow, for example €300,000 as a bridging loan then after selling your old house, you pay €150,000 back to the bank. The rest then becomes the loan, which depending on the mortality risk, a long repayment period can be maintained. Interest According to the official lists (therfore without negotiation), without handling costs and insurance the level of interest in the first quarter of 2008 was, approximately 5% with a tendency to further increase (4.75% for a fixed rate ‘prêt à taux fixe’ and 4.65% for a loan of 15 years with a floating rate ‘prêt à taux variable’). At longer maturities (up to 25 years) the percentages are somewhat higher. The bank and monthly charges The banks like to work with fixed monthly charges, which means that with a drop in the variable rate the term of the loan becomes shorter (the interest charges drop, increasing the amount of the repayment). Conversely, of course: the duration is longer when the variable rate goes up. When determining the variable interest rate the banks increasingly use the three-month average of the Euribor. Often referred to as compulsory insurance, the quoted percentages are increased by 0.36 percent, whereby a portion of the interest-rate benefit is not shown. Strong insistence can result in such insurance not needing to be locked in. Compare interest rates In order to be able to compare the offers of the strongly competing banks, it is best to assume the often-used ‘taux effectif global’ (TEG or TAEG, taux annuel effectif global): the cost of the interest, administrative costs (brokerage fees) and the premium of the compulsory life insurance co. Insurers and banks are obliged to include a ‘TEG’ number in all forms of advertising, brochures etc. What pecentage of finance? It is possible to get finance of up to 80% for a residence; commercial real estate such as a campsite can be financed for up to 50% and usually no longer than 15 years. Notary Fees The legal costs in preparing the old-fashioned mortgages are very high. You can calculate fees for any amount on the notaries site www.immonot.com. Note the difference with and without ‘frais de négociation’. If you buy directly from the owner and did not find it through a notary, you do not have to pay negotiation fees. Bank chargees are also negotiable The bank charges a one-off administration fee. This processing fee is however negotiable. An offer from the bank for a loan is valid for 30 days and all signed mortgages are reversable within a 10 day period from the signing, the ‘10 jours de réflexion’. | |||||||
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