British banks cannot arrange a mortgage which is directly secured against a French property. Only French lending institutions may take a guarantee on a French property. Thankfully, there are plenty of great reasons to work with French lenders. We'll explore those reasons in this guide.
There may also be challenges for some UK buyers when working with French institutions. Plus, specific eligibility criteria may exclude some UK buyers from securing a French mortgage. We will also examine these potential obstacles and discuss an alternative route to purchasing property in France.
You can only acquire mortgages against a French property through a French institution. However, this is not necessarily a bad thing. In fact, working with French lenders provides many benefits.
By taking a mortgage in euros, the purchase is not fully exposed to exchange rates immediately. Instead, the exchange is deferred over the payment term as you earn in sterling and pay in euros.
This provides a more stable option and can allow you to make payments where the exchange rate is more favourable.
French lenders offer appealing rates for risk-averse borrowers. British banks typically offer fixed terms of 5 years or less, but French institutions provide much longer terms, sometimes covering the entire repayment of the mortgage. Low-rate, long-term fixed mortgages take the guesswork out of home-buying, offering peace of mind and better financial planning.
Whilst French mortgages are an excellent option, not all UK buyers will be eligible. If you are aged over 70, are purchasing a low-value or old property, or have high debt (proportionate to your income), you may be unable to access a French mortgage. In these cases, you will need an alternative means of financing your purchase of a French property. One way to do this may be to remortgage your UK property. Raising equity against your UK property can free up the capital to make a purchase in France.
Some UK buyers may be more comfortable continuing to work with UK banks or keeping their finances in sterling. However, there are risks associated with remortgaging a UK property to fund a French property purchase. If the pound strengthens, your UK debt may be worth more than the euro-valued French property. This, in effect, creates negative equity. However, it is also possible that the opposite may happen. It is best to seek professional legal and financial advice to fully understand the risk before making your decision.
Buying a property can be a complicated process. Purchasing abroad can complicate things further. It is best to seek professional assistance when navigating the purchase of a French property as a UK citizen. Whether you are buying a holiday home or are planning on relocation, France Tax Law can help you.
We're a team of French property law experts who can help with all areas of a French property purchase. We can help you understand and manage the tax and successions of your purchase and much more. Speak with a French qualified notaire today to learn more. Call us on 020 8115 7914.
There is much more to consider when looking to purchase property in France. Use our helpful guides to assess your options and understand essential areas of French property and tax law, such as cross-border succession. We recommend starting with the following guides;