How a French Mortgage Works
French mortgages have in the main been used to purchase property or to fund
Re-mortgaging or re-financing has been virtually impossible, but recently
(during 2004 and 2005) there have been significant changes in the way some of
the banks and lenders are able to offer solutions, subject to their terms and
conditions of course.
A mortgage can be used to...
- Purchase a property which may or may not need renovation or improvement
- Purchase a new property or one under construction
- Bridging finance - only available when selling a property in France to buy
another French property and only if supported by a new mortgage
- Re-finance an existing mortgage on your French property and would like to
reduce your monthly payments and/or benefit from lower interest rates
- Replace a mortgage in another currency that you used to purchase your
French property and now would like to pay it back and take out a new loan in
- Release equity from your French property
Choosing the right type of mortgage which is suitable for you and your
circumstances is essential.
The Mortgage Procedure
Under French law, all mortgages are 'full status' and a lot of documentation
is required to support your mortgage application. Lenders are obliged to ensure
that any person applying for a mortgage is financially able to meet the mortgage
A word of warning: None of the lenders
like to give pre-approval to a mortgage - they consider it a waste of time. A
mortgage file has to be completely underwritten. The supporting documents about
income, income tax paid, bank statements, statements on all other forms of
borrowings are rigorously checked and cross referenced. That takes time. It may
be months before a suitable property is found, by which time all of the
financial information provided is out of date and up to date information has to
be provided all over again for the underwriters.
The two other essential factors governing whether a mortgage is granted or
not - the suitability of the property and life assurance cannot be determined
until a full application is made. The lenders have no guarantee that they will
eventually receive the mortgage application after their work on your behalf.
The mortgage application and supporting paperwork
Apart from a completed mortgage application form, life assurance form and a
copy of the Compromis that has been signed by both you and the vendor, you will
need to provide photocopies of...
- Identity - birth certificate, passport, marriage certificate and divorce
certificate if applicable
- If you are employed or receiving a pension - 3 months payslips, P60's or tax
returns, proof of any other income
- If you are self-employed or a director of your own company - 2 years
trading accounts and tax returns
- Banks statements (3 months) showing receipt of income and payment of
loans. Statement proving your fund for the deposit to your mortgage
- Statements (1month) relating to existing mortgage(s), loans and credit
cards and maintenance agreement if applicable
- If you live in rented accommodation you will be required to show your
- For pure interest only mortgages - a statement of assets
If you are buying a 'new build' or wanting to include the costs of works
/renovation in your mortgage you will need to provide further documents...
- For renovation or improvement works - professional estimates or invoices
from tradesmen registered in France together with a copy of their insurance
- For property to be built - the property title or preliminary sales
agreement for the land, building licence, the building contract and plans
- For re-finance or equity release - the title deed or loan deed with the
complete repayment table
When your file has been thoroughly checked and approved by an underwriter,
the lender will request a valuation of the property.
The valuation is not a structural survey. It is merely a valuation agreeing
that what your are paying for the property is worth the purchase price and the
amount the lender is being asked to lend is acceptable to them.
Once the valuation has been approved, the lender will submit your life
assurance form for medical underwriting.
In France, life assurance is mandatory to cover the amount and duration of
your mortgage. Most of the banks and lenders insist on their own in house
policies because they will cover all the terms of your mortgage and are
compliant with French regulations - existing life policies are not generally
acceptable or taken into consideration. Some lenders insist that disability
cover is included as well as life cover. The medical underwriters may ask you to
have a medical examination or tests.
Should you be declined mortgage funds, because of financial information, or
medical underwriting, or the unsuitability of the property, the lender will
advise you and issue you with a letter which you can use as your proof to have
your deposit refunded to you as agreed in the Compromis let out clause.
Subject to approval of your financial status, the valuation of the property
and acceptance for life assurance, an offer letter (offer preable du credit)
will be issued to you.
The offer letter and your acceptance
The rules about signing and dating your mortgage offer are very strict. There
is a 10 day cooling off period. This is a legal requirement and allows you
sufficient time to consider the terms of your mortgage before returning the
documents to the lender by post. You must sign and date the offer letter after
waiting 10 days but before 30 days have elapsed.
A word of warning: If you get the date
wrong, a new offer letter will have to be issued with another waiting period of
Some lenders will want their arrangement fee paid on acceptance of their
mortgage offer and your life assurance policy will by put on risk from the date
you signed the mortgage offer because you are now committed to the purchase and
bear the responsibility of completing on the purchase.
When the lender sends you the mortgage offer they also inform your notaire of
the details of the mortgage. Completion date should be concluded within 4 months
of receipt of your acceptance to the mortgage offer.
Getting ready for completion day
You can now arrange a time and date for completion to take place.
A word of warning: It is your
responsibility to instruct the notaire to request the mortgage funds from the
lender. We have known people who forgot - very embarrassing, and a waste of
Once you know the date you will be completing on your property purchase you
will need to make sure that your French bank account is open and funds
are transferred into it in time for the completion date and arrange for
buildings insurance to be on risk from the date of completion. You will need to
provide details of the insurance policy.
You will be sent a draft of the acte de vente (projet de l'acte) a few
weeks before the completion date. It will contain much of the same information
as in the original Compromis, but check it through carefully. It will also state
the date that you may move into the property. You will be asked to produce
your birth certificate and passport together with marriage
certificate and divorce decree if applicable.
If you think you may be unable to attend the meeting to sign the acte
de vente (final deed of sale) you can give a trusted person or friend a power
of attorney (a mandat) which authorises them to act on your behalf if you
unable to attend the actual signing.
The acte de vente is signed by you (the purchaser), the vendor and the
notaire. If both you and the vendor have different notaires, then only one needs
to witness the acte de vente. If you haven't done so already, you will be
expected to pay any outstanding fees and transaction charges.
A word of warning: Don't forget to take
your French cheque book with you.
Once the acte de vente has been signed and witnessed, the notaire has to pay
all the taxes, settle all the accounts of the purchase/sale and register the
deeds and mortgage. A few months later you will receive a certificate informing
you that the title has been registered. The original title deed is kept by the
notaire, but he is able to make authorised copies.
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