The first stage is to check feasibility. Beyond the knowledge of banking partners’ lending criteria, checking loan-to-value is still the first step to be considered when getting a loan. It’s a key component in loan capacity, and the recommendation of the French’s High Council for Financial Stability (HCSF) is to limit it to 35%.
Property loans
for non-residents
Overall analysis of lenders
and loan-to-value
Loan type
Borrowers can look at different forms of financing for a property project. However, the options for financing non-resident investors are limited. A loan with capital repayments is the standard type offered by credit institutions and banks in France. The monthly instalment consists of some of the capital borrowed and some loan interest. The capital is repaid in full at the end of the loan.
The interest-only loan, consists of regular payments of interest only and repaying all of the capital at the end. This kind of loan is not part of French banking culture as it is at British/US or Swiss banks, although it is offered by private banks in special arrangements, on the basis of extensive guarantees (assets under management, Lombard loans, etc.).
Bridging loans, access to housing loans and other zero-rated loans are not offered to non-resident borrowers.
Type of rate and robustness of French banks
French banking culture is specific as regards financing. It has many benefits with respect to the competing international markets:
Very competitive interest rates, linked to a monetary policy aimed at stimulating investment and demand, and low risk-free rates as a result of investor confidence in French government bonds.
Fixed rates are unchanged throughout the repayment term (no need to renegotiate them). French banks don’t like variable rate repayments, which increase risk for borrowers. They essentially offer fixed rates, on loan terms of up to 20/25 years.
The robustness of key French financial actors and their private banking subsidiaries, which have the lowest risk profiles in the world, as a result of compliance with the rules on their liquidities and equity (Basel III regulatory framework, put in place after the 2008 financial crisis), is further enhanced by their organization. Indeed, deposit and credit activities, their core business (most are mutualist banks), enable net banking income to be generated whilst reducing the risk exposure which traditionally comes from financial market and investment operations.
Lastly, the European Central Bank and the Banque de France have the role of regulating and monitoring operations, ensuring financial institutions’ stability and solvency. The Banque de France also plays a key role in consumer protection.
Related costs
The costs related to purchasing a property and putting in place a loan in France are as follows:
Notary’s fees: approximately 7.5% of the purchase amount for old properties, and about 2.5% for new (off-plan).
Costs of guarantees: When taking out a loan, the bank requires a guarantee on the property financed, which can take the form of a mortgage (“HLPD” or traditional mortgage), or a private guarantee company, the cost of which varies. You should budget for between 0.6% and 1.5% of the amount borrowed according to the property.
Bank fees: Banks charge loan fees according to their own tariffs.
Broker fees: Our fees are calculated according to a percentage of the loan amount with a fixed minimum, and are only billed once funds are released if you have chosen one of our banking partners’ offers (success fees). Traditionally they are set at 1%, but may vary according to the amount borrowed and the project’s complexity. This remuneration is clearly stated in our financing search mandate which is signed together with yourself at the outset of the relationship.
Depending on our agreements and banking partnerships, some of our remuneration may come from the credit institution itself, for customer introductions. That remuneration is now capped by banking institutions. It must be stated on an advisor sheet (Fiche de Conseil) signed by borrowers.
Commercial consideration
Financing individuals is not deemed to be the most profitable activity for banks in France, since loans are a loss leader. This has been all the truer in recent years with reductions in interest rates, and the existence of a maximum loan rate set by the Banque de France (called Taux d’usure). For this reason, financing non-residents is not a priority operation for French banking groups. Hence, in order to support this activity, lenders have considerably increased their requirements as regards commercial consideration.
Such consideration generally takes the form of a subscription to a package of services (bank accounts with means of payment and assorted insurance policies), but also investments (with or without pledges during the loan term).
Process (remote)
The different stages in a financing application are as follows:
Framing the project / Feasibility and loan simulations to prepare for the pre-contract of sale
Getting offers from our partners
Putting together your supporting documents, examination by our brokers and submitting a complete application to the banks
Bank analysts examine the application and it is submitted to a credit committee for agreement in principle
Completing subscriptions and any agreements on commercial consideration
Issue of the loan offers
Acceptance of loan offers with cooling-off time ('Scrivener Act' period)
Release of funds
Signature of property deed
Home, Sweet Home!
Legal Notices
MORTGAGE IN FRANCE is a brand of BC&C, an SAS with a capital of 5000€
BC&C SAS is entered on the Trade Register of Nice under number 822 172 938
MIOBSP is on the Orias register under number 1600503
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