Finance your house in France with a french mortgage

Best Mortgage rates for french mortgages

Which mortgage is right for me?

All of the mortgage products we offer for purchasing homes in France are in euros. When choosing your mortgage, you will want to consider the:

	duration of your loan
	amount of your down payment
	type of interest rate: variable or fixed or a hybrid
	type of loan: amortised vs. interest only
	early re-payment fees

Duration of your loan

It’s possible to borrow for a duration of anywhere between 5 and 30 years. The longer the loan term, the lower your monthly payments will be.

Amount of your down payment

Typically, the banks will require a cash down payment of 20% of the total of the purchase price and renovation costs. This can potentially be reduced to 10% depending on your situation. For leasebacks we are able to finance up to 100% of the price ex VAT but including notaire fees. Other cash outlays required include the mortgage fees and closing costs.

	Purchase price – for classic properties, this includes the price of your home and the real estate agent fees. In some cases, if you exclude the agent fees from the purchase price in your compromise de vente (which will lower your notaire fees), you will not be able to finance the agency fees. Talk to your notaire about those options before signing the initial purchase agreement. For leasebacks, this is the price on your reservation contract. In some cases you must fund the VAT and then reclaim it after the property is constructed. In other cases, the developer funds the VAT.
	Renovation costs – it’s possible to finance renovation for classic properties. The bank may require estimates from licensed contractors and disperse the funds to them directly once the renovations begin. The banks don’t expect you to know your exact renovation plans at time of purchase. You can get a general estimate from one contractor then choose a different contractor to do the work later.
	Mortgage fees – this includes the bank’s processing fees and broker fees.
	Closing costs this general term includes taxes, notaire fees and mortgage registration fees (“frais d’hypothèque”), all of which are set by the government. Count on 6 to 8% of the purchase price for properties older than 5 years, 5% for leasebacks and 3 to 5% for new construction or properties less than 5 years old.

Type of interest rate : variable or fixed or hybrid

Variable interest rates are based on adding a margin to an interest rate index like the “Euribor 3 month”. The advantage of variable rates is that they are the lowest in the market. They are typically fixed for the first 6 months to 1 year then go up or down as the market index moves. Many banks offer variable rate mortgages that limit the risk of a rise in interest rate. For example, the interest rate increase can be capped or limited to a percent of inflation. The monthly payment amount can also be fixed. If interest rates go up, the term of the loan is extended rather than raising the monthly payment. Most products give you the option to convert to a fixed interest rate at any time. France Home Finance also offers products that allow you to choose your monthly payment amount or delay payments.

A fixed interest rate loan has an interest rate that remains fixed for the life of your loan. The advantage is that you know exactly where you stand throughout the duration of the loan. The disadvantage is that you pay a higher interest rate for this security.

A hybrid interest rate has both variable and fixed elements putting it in the middle in terms of risk and known cost.

Type of loan: amortised vs. interest only

Amortised loans require you to make payments to the bank of both your interest and a portion of the amount you borrowed. You pay back the amount you borrowed over time.

With interest-only loans, you pay only the interest expense for an initial period, and then you either repay the amount you borrowed in full or switch to an amortised (repayment) loan. The advantage of interest only loans is that the monthly payment is considerably smaller because you are not repaying the capital. This often means the rental income on your property can cover the mortgage payment. An interest only loan also makes sense if you expect the value of your home to rise substantially over time and you plan to sell before you would have paid off the loan in full.

Early re-payment fees
Most variable rate loans allow you to pay down your loan at any time without penalty. Other products let you reimburse up to a certain amount each year without penalty. Most fixed rate loans do charge an early repayment penalty of six months interest on the amount prepaid. It is important that you understand the terms and conditions of pre-payment for the product you choose.