Trying
to secure a French mortgage?
Give
yourself the best chance
Up until now, 2012 has certainly been an eventful year for the French
economy. Banks have had to contend with the ongoing financial troubles
affecting the eurozone, in addition to the uncertainty inevitably caused by the
country’s own presidential elections.
Consequently, some mortgage applicants have found banks to be more
cautious than usual with regards to lending for French property purchases. This
results in refused applications and a lot of frustration for otherwise keen
buyers.
Certain criteria must always be met in order for a buyer to qualify for
a mortgage with a French lender. For example, when taking into account the
future French mortgage payment, all contractual outgoings must not exceed one
third of a borrower’s monthly income.
So, what steps can you take to give yourself the best possible chance
of successfully obtaining a French mortgage?
The answer to this question largely rests in how you manage your bank
accounts. As part of the application, all French lenders will ask to see three
full months of statements for each account that you hold. They will want to see
that you are in complete control of your finances, and that you are ideally
adding to your savings on a monthly basis. Overdraft facilities are not
commonplace in France, and banks will take a dim view of applicants who
regularly dip into an overdraft or, worse still, who have exceeded an overdraft
limit.
Credit card payments do not typically form the basis of the
affordability calculations carried out by French lenders. You should, however,
aim to reduce your credit card debt as much as possible before commencing the
application. The ideal scenario for the lender is therefore that the buyer is
not overly indebted already and, month after month, can be seen to put aside
money. This creates the reassuring impression that there is space for another
outgoing alongside the applicant’s existing commitments.
Lenders will almost always demand a 15% or 20% deposit for purchases
financed by a mortgage, and buyers will also have to pay for the notary fees
out of their own funds. In the current lending climate, credit departments are
asking for evidence of savings over and above the bare minimum. This is
essential in reassuring the lenders that you will be able to cope with the
ongoing financial demands of maintaining a new property.
Some of you may also be fortunate enough to have access to donated
funds for your purchase, be it from a family member or friend. Caution should
again be advised in this scenario. More and more, the lenders will require the
buyer to be contributing at least some of their own funds to the purchase. It
is no longer the case that a complete absence of savings can be made up for by
a sizable donation to the buyer’s benefit.
With regards to the property being purchased, the lenders will
invariably carry out their own valuation to confirm that it is a sufficient
security against which to guarantee the loan amount. It has become increasingly
common for properties to be ‘down valued’ and for lenders to refuse the financing
on these grounds. If you are taking out a mortgage for your purchase, it is
best to avoid properties which are completely isolated in rural areas. Although
these often represent the best bargains for your purchase, the lenders may
worry that they will be difficult to sell on if they ever needed to be
repossessed.
The most important thing to bear in mind is that all French mortgage
banks employ very different criteria when it comes to assessing a mortgage
application. Just because you are not able to secure a mortgage with one French
lender, it doesn’t necessarily mean that will be the case across the board -
shop around is always the best advice!
