Obtaining a mortgage for your Nice property purchase
Funding your property purchase in Nice with a French mortgage is a well-trodden path. Numerous banks – including HSBC, BNP Paribas and Crédit Lyonnais – provide loans to foreign buyers from across the European Union, US and Asia.
We help to arrange mortgages for our buyers through Peter Brooke, a regulated independent financial adviser and mortgage broker with The Spectrum IFA Group. He’s available to meet with our clients on an ad hoc basis.
Peter has nearly a decade of experience is obtaining mortgages for property along the French Riviera. Over the past eight years he has helped over 200 buyers secure loans for approximately €35 million.
Peter has laid out his guide to obtaining a mortgage in Nice below. He can be contacted at firstname.lastname@example.org.
Obtaining a mortgage for your property purchase in Nice
The single most important element in obtaining an apartment or villa in Nice is income. Strict Banque de France lending laws state that your total debt cannot exceed more than one third of your total income.
As an EU but non-French resident you can apply for a loan to value of up to 85% of the purchase price. You must then fund the 15% deposit plus the Notaire fees. Non-EU residents are normally able to borrow up to 70%. The repayment term of these loans can be up to 30 years, depending on your age and the bank.
Obtaining a mortgage in France adds an additional charge to your Notaire fees: it will bring them up to around 8%, from the usual charge of around 7.2%.
Most mortgage interest rates in France are linked to the three-month or 12-month Euribor Index (Euro Interbank Offer Rate). Some banks also offer variable rate mortgages that can safeguard against interest rates rises by capping the maximum rate or by extending the term of the loan rather than raising the monthly payment. Most products also give you the option to convert to a fixed interest rate at any time.
What will it cost me to arrange a loan and why should I use a broker?
All banks will charge a frais de dossier for arranging the loan, normally 1% of the mortgage amount, capped at €1,500.
The Spectrum IFA Group receives a commission from whichever bank provides the loan. Peter Brooke is remunerated from this, so he charges no fees for his advice or time. This also means that he is only paid if he actually obtains the loan agreed, so his interests are directly aligned with Nice Pebbles’ clients.
Peter knows the mortgage market very well and can not only find the best product but can give a very good indication as to whether you will actually qualify for the loan in the first place.
In addition, through his extensive network of legal and tax contacts he can provide a central point for all property issues before, during and after the sale has gone through.
Other types of mortgage
While most Nice Pebbles clients routinely borrow around 80% of the purchase price or their nice property, there are other mortgage options in France.
Hugely popular in the UK and US, interest only deals are becoming more widespread in France. There are three main types.
1. Instead of placing your deposit into the property you take a 100% interest only loan and invest the deposit (minimum of 20%) into a French investment scheme that runs along side the mortgage. These schemes can have significant tax planning advantages and can offer flexibility if you are going to buy and sell a lot of properties as they can be kept as the deposit for the next purchase.
2. Some banks offer a product that is interest only for five or ten years and then becomes a repayment loan for ten to 25 years. This is particularly useful if you believe you will pay off large sums in the first period.
3. One bank now offers an 80 percent interest only product that simply requires you to provide proof that you hold other net assets valued between 120 percent and 150 percent of the loan amount. This is a very popular product, especially to those who own other properties.
Buy-to-let loans don’t exist in France. Future rent can be taken into account but banks will only take 80% of the possible rent as part of their calculation and you must still be able to afford the loan without it.
You may now release up to 70 percent of the value of the property or re-mortgage existing loans to get better rates. Usually a reason for the equity release is required, but the list of options is broad. Bridging loans, renovation costs and loan consolidation solutions are also all available in France.
Refinancing loans is particularly interesting at the moment with interest rates being so low, though there are costs to consider when looking at the pros and cons of this option.