Despite the economic turbulence in the Eurozone over recent years, there are still many options available for international buyers who wish to take out a significant credit facility for the purchase of a French property. Applications from buyers wishing to take out a large French mortgage of this nature are assessed more strictly by the underwriters but, for borrowers with the right profile, the banks can sometimes show more flexibility with the final conditions of the mortgage.
Here are some basic pointers to keep in mind:
- Different lenders have different lending policies regarding a borrower’s place of residency and nationality. Generally speaking, borrowers from all over the world are able to access mortgages in France, but certain banks act more favourably than others towards income that is sourced in non-EU countries.
- Applicants who are self-employed, or who receive income from a variety of different sources, are required to submit fully documented proof of taxable income over the last two to three years. French lenders favour mortgage applicants who can show consistent levels of income, in addition to a diversified asset portfolio and a good level of accessible liquidity.
- A wide variety of credit only facilities are made available for larger loan sizes. These include capital and interest repayment mortgages with fixed, variable or capped rates. Interest only options tend to be more restricted, but are still offered by some lenders. Private banks may provide the most attractive deals, but will sometimes ask for an investment to be placed with their institution in return.
- A mortgage can be beneficial in mitigating exposure to French Wealth Tax, which is charged on all French net assets above €800,000. Securing a mortgage directly against a French property reduces the net value of that asset and can take you under the wealth tax threshold.
- In the case of a property being purchased purely as an investment, paying monthly interest on a French mortgage can offset the Income Tax which may apply to revenue from rental and lettings. Choosing to let a property out does not tend to restrict the mortgages available, but future rental income is not generally included in affordability calculations.
- Banks will stematically carry out a valuation on the property against which a large mortgage is being secured. Unique types of property (such as chateaux or listed buildings) are assessed for suitability to be used as a security on a case-by-case basis, as banks will be keen to establish the resale value of the asset involved.