Unless you are a cash buyer, and there may be some compelling reasons NOT to be (see below), a mortgage will be required to secure your purchase in France. Some buyers choose to arrange finance in their home countries, with equity release or re-mortgages on existing property, while others consider obtaining finance in France.
Financing your Villa in Nice
French mortgages can represent good value compared to rates in the UK and the US and are available to foreign buyers. Non-residents can normally expect to be able to borrow 80% of the value of the French property, rising to 85% in some cases, leaving 15% or 20% of the value to be paid by the buyer, with the duration of the loan between 7 and 25 years. The buyer must also pay the notary fees/taxes (approx 8%).
We have specialist financing for your villa in Nice available through our partners
French mortgage lending requirements are based on a debt to income ratio, instead of the salary multiplier calculation used in other countries. As a general rule, total debt must not be greater than one third of your monthly income.
Under French law, the ‘compromis de vente’ can contain a mortgage clause that states that should finance be declined from three French mortgage providers, the prospective buyer is entitled to a full refund of his/her initial deposit of 5% or 10%. Please note that a mortgage clause does not cover you if you are getting a loan in another country.
The following documentation will be required to obtain a French mortgage.
If you are employed:
- Payslips for the last three months
- Tax returns from last two years
- Proof of any other income received; e.g. bank statements showing rent on investment property.
- Proof of any other assets; e.g. copy of share certificates, investments or deposits.
- Photocopy of passport & birth or marriage certificate
- Bank statements from last three months
- Copy of ‘compromis de vente’
- Copy of formal quote (‘devis’), if renovations need to be financed
- Proof of deposit sent to Notaire
- Utility bill from primary residence
If you are self-employed, all the above, plus:
- Certified balance sheet and profit and loss account from last two years.
- Proof of last two year’s personal tax returns
There can be some compelling reasons not to buy a property for cash and to take a mortgage in France, these include:
- Protection under the mortgage clause in the compromis, not applied to foreign lenders.
- Euro debt on a euro asset (reduced currency risk)
- It is very difficult, and expensive, to later release equity from a French property.
- The loan at the point of purchase is offset against ‘wealth tax’, equity release isn’t.
- If the property is rented out then the interest on the loan can be offset against income.
- Receiving euro income (as rent) to repay a euro loan.
- Record low interest rates in Europe with minimal chance of an increase in the near future.
Always take expert, regulated financial advice when considering the options and remember your property can be at risk if you fail to keep up repayments.