A guide to French mortgages

If you want to buy property in France, it’s a good idea to know how French mortgages work. Find out about securing one and making repayments.

If you’re moving to France and are tempted to buy a home, you might be wondering how to finance your purchase. Getting a French mortgage might seem difficult or expensive – as an expat, you might not know where to start. Read on to learn how to get a mortgage, what you can use it for, and how to repay it. Sections cover:

Mortgages in France

Whether you’re relocating and buying a home in France, looking for a holiday home, or investing in real estate, you’ll likely need a French mortgage. French banks and brokers provide a range of mortgage products to residents and overseas buyers. Nevertheless, the government tightened restrictions on mortgage periods and loan amounts in January 2022 to reduce the risk of personal debts.

House with a tree with blossom outside the window in the suburbs of Paris

31.4% of French households had a mortgage in 2020. This is above the EU average of 25%. Although house prices have been steadily rising in France since 2016, interest rates on French mortgages have stayed lower than in countries such as the UK and Spain. In fact, they have dropped from 2.4% in 2014 to 1.12% at the end of 2021.

Should you buy property in France?

The French property market is one of Europe’s core performing property markets. With low mortgage rates, it’s easy to see the attraction for expats looking to buy property in Europe.

The property market in France remained fairly resilient throughout the COVID-19 pandemic. Over one million existing homes were sold in France in 2020, down just 4% from 2019. Demand is now rising strongly for both existing homes and new builds. House prices in France have increased at their sharpest levels in over a decade since the pandemic, with an overall year-on-year increase of 5.85% in 2021. However, this has been lowest in the Île-de-France region, which has seen a rise of 2.1%. In fact, Paris has experienced a slight decline, with apartment prices falling by 0.2%.

France remains a good option for property purchase thanks to its stable market, fairly robust regulations, and lack of restrictions on foreign ownership. However, you’ll need to consider the property transaction fees, which can total around 10-15% of the purchase price. Capital gains tax also applies if you sell the property. The standard rate for this is 19% tax plus social security contributions at 17.2%.

Ultimately, whether you choose to buy or rent in France may depend on how long you plan to stay. If you think you might be there for less than five years, it may prove difficult to offset the costs in this short time.

Who can get a mortgage in France?

French lenders offer mortgages to both residents and non-residents. You will need to meet income requirements and provide a minimum deposit (more details on amounts below). Self-employed individuals need to show a set of audited accounts for at least three years.

Lenders may want to check your credit history, and some have age restrictions. It can be difficult to get a French mortgage if you’re over 75. French mortgages are usually only available with a property purchase agreement, but you can sometimes secure a certificate of commitment (pre-approval letter) from a mortgage lender. This allows you to negotiate with the seller and is usually valid for three or four months.

Old-fashioned apartments in Bordeaux city center

Another requirement of French mortgages is to have a protection insurance policy, such as a life insurance policy. This should be equal to 120% of the value of your mortgage. Some lenders also ask for health insurance policies and may ask borrowers aged over 50, or those borrowing more than €150,000, to submit to a medical exam.

Getting a mortgage as a foreigner in France

While French banks extend credit to foreign buyers, they may have additional requirements. For example, while most banks will loan in the region of 70-85% of the property’s value, some may only allow up to around 50% if you are a non-EU/EFTA national.

To get the best French mortgage interest rates, French mortgage providers may ask non-residents to open a savings account with a minimum deposit equal to at least 24 mortgage payments. For example, if you secured a €100,000 mortgage with a 1.5% fixed French mortgage rate for 10 years, you might be required to lock up capital of some €15,000.

Types of mortgages in France

France has an established mortgage industry and experience in dealing with foreign buyers. However, you may find fewer product variations than in some other countries. Here are the main types of mortgages in France.

Interest-only mortgages

Interest-only loans are increasingly popular in France. When borrowers take out this type of mortgage, they pay back only the interest for an agreed initial period. As buy-to-let mortgages aren’t commonly available, interest-only loans are popular for investors who want to rent out their property. However, it can be more difficult for foreign buyers to take out this mortgage.

Since mortgage interest is deductible against rental income, this mortgage type can greatly reduce the monthly payments for the investor.

Fixed-rate and variable-rate French mortgages

Borrowers can also choose between fixed-rate and variable-rate mortgages. These are usually repayable over a period ranging between six and 25 years. Fixed-rate mortgages are often set at a higher rate, but this comes with extra security.

One interesting fixed-rate mortgage product is a flexible mortgage. This product provides the security of a fixed interest rate but allows borrowers to vary their monthly payments based on their circumstances. Typically, the lender sets upper and lower payment limits, but, in some cases, payments can be suspended for up to two years or increased by up to 30% for a quicker payoff. Of course, rates for these features can be higher, so it’s only worth choosing them if you’re sure you’ll use them.

Window of an apartment in Castellar with a for sale sign

Variable-rate mortgages in France hinge upon the three-month or one-year Euribor rates plus a 1-3% margin, so it can be difficult to get a transparent picture of long-term rates.

You can also opt for a mixed mortgage in France, where you set a fixed rate for a set period (usually 2-5 years), after which it moves to a variable-rate mortgage.

Capped-rate mortgages

This is a recent introduction to the French mortgage market and is available to non-residents. This is similar to a variable-rate mortgage, but it includes a capped upper limit for all or part of the repayment term.

Capped-rate mortgages are popular with buyers who are worried about rates suddenly rocketing beyond what they can reasonably afford. However, they usually come with slightly higher fees.

Bridging loans

Borrowers in France also have access to bridge loans, designed specifically for buyers who are ready to purchase property but are waiting for the sale of their existing property. Such loans are short-term solutions. However, you may extend them for up to two years.

Bridging loans are similar to mortgages in France in that you can usually only borrow the same amount that you’d get through a mortgage (usually 70-85% of the property value). This is generally up to a maximum of around €15 million. However, the interest rates are typically much higher than with a mortgage.

French mortgages for other purposes

You can find providers of other mortgage products in France, including:

  • Buy-to-let mortgages – for property purchases where you aim to profit from renting it. Not all French lenders offer these, but they are available. However, interest rates are typically higher for non-resident buyers.
  • Commercial mortgages – for business premises in France. These usually require a larger deposit but allow you to borrow larger sums of money.
  • Renovation mortgages – many lenders in France are willing to finance large-scale home improvement projects with a renovation mortgage. However, if you are looking to buy and refurbish a derelict building such as an old château, it is more difficult (but not impossible) to get finance. For works costing less than €150,000, you will typically need to take out a standard home renovation loan.
  • Construction mortgages – you can also find mortgages in France to finance the building of a property if you have already purchased the land. The loan-to-value (LTV) ratios are typically the same as standard mortgages.

Green mortgages in France

The idea of eco-friendly living spaces has gained momentum in France, as it has in much of Europe. In 2015, the financing of green building and renovation projects reached €14.5 billion. Much of the funding available for residents has been in the form of public subsidies, tax incentives, and financing, such as interest-free eco-loans (eco-PTZ) of up to €50,000 for home energy renovations.

However, there is still some way to go in terms of making French homes energy-efficient. Less than a quarter of French properties (24.6%) have an energy-efficiency rating of A-C. This is lower among privately-owned homes.

You can qualify for a green mortgage in France if you buy a property that meets energy efficiency standards. French banks, including Groupe BPCE and the Caisse des Dépôts Group, have signed up to an EU-wide green mortgage scheme offering lower interest rates and other preferential financial options to fund the purchase of eco-friendly properties. Check with your provider to see what discounts and initiatives they offer before signing a mortgage agreement.

Mortgage rates in France

Interest rates on mortgages in France depend on several factors, including:

  • Amount you borrow
  • Loan-to-value (LTV) rate
  • Mortgage type
  • Duration of mortgage
  • Property type
  • Your residency status

French mortgage rates have been lower than in many other European countries in recent years. Over the past decade, they have also reduced considerably from an overall average of just under 4% in 2021 to 1.14% in December 2021. According to the Banque de France, they are predicted to rise slightly to an overall average of 1.17% in April 2022. The average fixed-rate mortgage was 1.14% in March 2022, while the average variable-rate mortgage was 1.22%.

How much can you borrow for a French mortgage?

French banks and other mortgage lenders are typically willing to lend between 70-85% of the property’s value (the LTV rate). For non-EU/EFTA nationals, the LTV rate is usually 50-75%. However, French citizens and permanent residents can sometimes borrow up to 100%, usually with the proviso that a percentage of this is placed in a savings account with a French bank.

Your income also influences the amount you can borrow. The legal requirement for French mortgages is that your total monthly liabilities – including mortgages, bills, and any other rents – must be no more than 33% of your gross monthly household income. Types of income lenders will consider include:

  • Salaried income
  • Dividends with a three-year track record
  • Other regular investment income
  • Business income
  • Pensions income
  • Existing rental income from other properties

If you are self-employed or a freelancer, you will need to show business statements evidencing your income for the last three years.

Most mortgage providers in France have a minimum amount they will agree to lend. This is typically between €50,000 and €100,000, although it may be higher with some lenders. It may also be higher for non-EU/EFTA nationals.

Online mortgage calculator

You can use the following free tools to calculate your estimated monthly repayments and how much you can borrow:

How to apply for a mortgage in France

Applying for a French mortgage is relatively straightforward and similar to other countries.

It can be worth consulting several mortgage lenders to see which one will give you the best interest rate. In France, many banks offer mortgages to foreigners buying property. There are also many specialized mortgage providers focusing on expat mortgages and services.

As a buyer, you can request an official mortgage offer from the lender of your choice once the seller and buyer have signed a preliminary sales agreement, the bank is assured the buyer can afford the loan (per French standards), and the property’s value supports the loan request.

Once you have completed the necessary application paperwork and agreed to the life insurance coverage, the lender will send you the mortgage offer. You must wait at least 10 working days (but not more than 30 days) before signing and accepting the offer. Finally, the lender will send a copy of the mortgage agreement to a notaire (notary), who will prepare the deeds of sale. The whole process typically takes around 2-3 months from signing the initial sales agreement to completion of purchase.

Window of an estate agent in Lille

When applying for a mortgage in France, you will usually need the following:

  • Completed mortgage application form
  • Copies of the borrower’s passports
  • Proof of income (self-employed individuals need audited financial statements for three years)
  • Bank account details, usually with a bank operating in France
  • Bank statements for the last three months
  • Proof of current address, for example, utility statements or a rental agreement
  • Statement of assets
  • Completed preliminary sales agreement
  • If the property is new or to be renovated, written estimates or invoices from French-registered tradespeople and copies of their certificate of insurance
  • If improvements are to be constructed on the property, a property title or preliminary sales agreement for the land, building license, and the building contract and plans
  • The title deed or loan deed with a complete repayment table if the property is to be financed with a remortgage or equity release

Banks offering mortgages to expats in France

Many French and international banks offer mortgages to property buyers in France. These include:

  • HSBC
  • BNP Paribas
  • Société Générale
  • CIC

Mortgage brokers offering mortgages to expats

You can also use the services of a mortgage broker in France who will help you find the best deals and take care of the application. Check our Directory for details of expat-friendly mortgage brokers.

Help with securing a French mortgage

Those who need help getting a French mortgage may be able to access a government-regulated or subsidized loan. The most common of these is the “interest free loan” (Prêt à Taux Zéro – PTZ). This is available for first-time buyers or those that have not owned a property for at least two years. In addition, you can obtain a PTZ if you have a disability card (Carte mobilité inclusion – CMI) and are unable to work or if you need a mortgage to renovate a property made uninhabitable by a natural disaster.

PTZ loans are also conditional on income and resources. The income thresholds depend on location (split into four zones – A, B1, B2, and C) and the number of occupants. You can calculate your entitlement here (in French). You cannot use a PTZ to finance 100% of a property purchase, so you need to combine it with your own funding or another mortgage.

Other support available includes:

  • Employer mortgage loans (prêt action logement) – low-rate loans for employees of private companies with 10 or more employees, with interest rates of 0.5%. You can borrow up to a maximum of €40,000.
  • Social accession loans (prêt d’accession sociale) – similar to the PTZ, these are available to those who meet low-income requirements. However, the interest rate is capped rather than scrapped.
  • Home purchase savings accounts (compte épargne logement – CEL and plan d’épargne logement – PEL) – high-interest savings accounts geared towards saving for a French mortgage.

Mortgage costs in France

Mortgage costs in France depend on multiple factors – they are usually more expensive for existing properties than new builds. You can expect to pay between 10-15% of the purchase price in total transaction costs when buying property in France, including taxes and insurance. Fees relating to the mortgage include:

  • Mortgage arrangement/administration fees – typically around 1% of the amount borrowed (plus VAT)
  • Notary fees – usually about 2-3% for a new property and 6-8% for a property older than five years (plus VAT)
  • Valuation survey – sometimes a requirement of lenders, costs around €250

Taxes and tax relief on mortgages in France

You will be subject to property tax (taxe foncière) when you buy a property and take out a mortgage in France. This is based on an annual rental value multiplied by a percentage set by the local commune. It’s usually around 1% for primary homes and 3% for secondary homes.

There are some exemptions and reductions for property tax:

  • You can get a two-year exemption on new builds and any new construction work to existing properties if you notify the tax authorities within 90 days of completion.
  • Some local authorities offer exemptions or reductions for up to five years if you carry out energy-saving work on the property.
  • If you are over 65, have a disability, or are on a low income, you may be eligible for property tax exemption or relief.
Two elderly women on a balcony in Paris

Other mortgage and property-related taxes include:

  • Real estate wealth tax (impôt sur la fortune immobilière – IFI) – payable on properties valued over €800,000, starting at 0.5% and progressively rising to 1.5% for properties over €10 million
  • Stamp duty (droit de mutation) – usually included within notary fees
  • Capital gains tax – levy of 19% of profits if you sell the property, plus 17.2% in social charges
  • Housing tax (taxe d’habitation) – payable by residents for local services, this tax is being phased out and will be abolished by 2023
  • Taxes on vacant housing (taxes sur les logements vacants – TLV/THLV) – 12.5% of rental value, rising to 25% after the first year

There are various tax reliefs and credits (in French) that some can claim. These include deductibility of mortgage interest on tax paid on rental income if you rent out your property. These deductions also apply to French inheritance tax.

You can also offset the value of property subject to IFI by 30% if you live in it as your main residence.

French tax laws can be complicated. Therefore, it’s advisable to seek the advice of a financial expert when planning your taxes in France. Search for tax advisors in our Directory for France.

Property insurance in France

Most mortgage lenders in France insist that you take out life insurance coverage to protect the outstanding balance in the event of death or life-limiting injury. Many lenders also have a home insurance policy as a requirement. This covers damage to the building, but people often choose to take out multi-risk policies that also cover contents and third-party liability.

If you buy a new-build home or carry out extensive renovation work on your home, you’ll usually need to take out a construction insurance policy that protects you against defects for the first ten years. This is included with many multi-risk plans.

Companies providing home insurance policies in France include:

Mortgage repayments in France

French mortgage repayments are usually monthly and consist of two parts: loan repayment and interest payment. On the other hand, if you take out an interest-only mortgage, you just pay off the interest for the initial period. You will usually start paying off your mortgage in the month following the purchase of your home. Some lenders may offer a short repayment holiday period (usually 6-36 months) or a limited period where you pay back only the interest.

If you want to pay off your mortgage early, check with your provider to find out if this incurs penalties. Rules vary across lenders – some apply an early exit fee. This is typically the case for fixed-rate mortgages. The fee is capped at 3% of the outstanding balance or six months’ interest. It is less common for penalties to apply to variable-rate mortgages. Lenders cannot apply early repayment penalties in the event of death, loss of work, or if the property sale is tied to a change in employment.

If you run into difficulties repaying your French mortgage, you should contact the lender as soon as possible. Most lenders are willing to renegotiate the terms or even offer repayment holidays. In fact, they have to do so if certain events occur (for example, a death or sudden unemployment). If you are in serious difficulties and at risk of losing your home, you can apply for assistance from the Over-indebtedness Commission (Commission départementale de surendettement). The commission will act on your behalf and try to prevent repossession. You can find more information on how to apply online (in French).

Refinancing a mortgage in France

Refinancing your mortgage – essentially, paying off your existing home loan by taking out a new one – is possible in France. However, this is not as common as it is in other countries, such as the UK. Therefore, there are fewer remortgaging products on the French market than in many other countries, and costs are quite high, which can offset potential financial benefits.

You might want to look at remortgaging your property to take advantage of lower interest rates or to release equity for other purposes, for example, renovations or the purchase of another property. However, be prepared for costs such as:

  • Higher interest rates. Many lenders offer higher rates on repayments for clients looking to remortgage.
  • Lenders also often offer lower LTV rates on mortgage refinancing, for example, 75% rather than 85%.
  • Administration costs, including notary fees, which can total around 3-5% of the loan costs.
  • Early repayment fees on your existing mortgage, which many lenders charge.

Useful resources

https://www.expatica.com/fr/housing/buying/your-guide-to-french-mortgages-102497/

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