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FINANCE

Why getting a mortgage in France is about to get more difficult

For most people wanting to enter the French property market - either for their main residence or a second home - a mortgage will be essential. But new rules means this might be about to get more difficult.

Why getting a mortgage in France is about to get more difficult
Photo: AFP

Two recent decisions have tightened up the rules and criteria for getting a mortgage in France.

In late January, France’s financial watchdog, the Haut Conseil de stabilité financière, tightened regulations on lending – notably on the sums that could be borrowed – in an attempt to calm down the country’s real estate market in the face of longer mortgage periods and generous lending options.

 

The Banque de France, meanwhile, has called on lenders to return to ‘good practices’.

“In 2020, in spite of the lockdowns, we had 5.4 percent growth in real estate credit, as in recent years,” Emmanuelle Assouan, Deputy Director General for Financial Stability, told Le Parisien.

“We have become the eurozone country where households are the most indebted. We have reached a critical threshold.”

Lending limits

Banque de France’s key strategy is to limit the amount the majority of mortgage-seekers are permitted to pay in repayments to a maximum of 35 percent of their net income, including “repayment of the borrowed capital and all interest and insurance charges” over a maximum mortgage period of 25 years.

Other loans are also taken into account when calculating a prospective borrower’s level of debt.  Anyone who already has loans that eat up more than 33 percent of their income will be refused.

READ ALSO The real cost of buying a house in France 

Other requirements

But the rules don’t stop there, stricter rules also mean that borrowers will be expected to be able to lay down a minimum 10 percent deposit on a property, Maëlle Bernier, a spokeswoman for price comparison site Meilleurtaux.com told the paper.

She added that this would likely mean in effect lenders would be more cautious about who they would lend to, saying: “Then, you would need to have a permanent contract and not be in a sector threatened by the health crisis.”

This is an important point in the current situation. Borrowers employed in tourism, aeronautics, catering or events – all sectors badly affected by the pandemic and subsequent lockdowns – could find it more difficult still to get a mortgage because of the precariousness of their employment.

READ ALSO Six things to think about before buying a house in France

Second home buyers

Brits who want to be buy second homes in France could be facing another Brexit-related headache, France-based mortgage broker Eddie Sammon explained to the Local earlier this year.

He said that one French bank had told him UK residents wishing to obtain a mortgage for a second home in France must satisfy the conditions to be classed as a high net-worth or high-income individual, unless they are purchasing a primary residence or a property which will be mostly rented out. UK citizens who are tax resident in France will not be affected.

READ ALSO How to calculate notaire fees when buying French property

“To be classed as a high net-worth or high-income individual, Britons will need to earn at least £150,000 per year or have £500,000 in net assets,” he said. “For couples, this is required for each borrower.

“The bank has stated that they have introduced this criteria ‘in order to comply with new regulatory requirements in force in the United Kingdom’.”

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FRENCH BUREAUCRACY

Everything you need to know about your vital French ‘dossier’

It's a crucial part of life and an incomplete one can bring about a whole world of pain - here's what you need to know about your French dossier.

Everything you need to know about your vital French 'dossier'

The French word un dossier simply means a file – either in the physical sense of a plastic or cardboard item that holds documents together or the sense of a collection of documents. You might also hear civil servants use dossier to refer to the responsibilities they hold, as in English we might say their ‘brief’. 

But by far the most important use of dossier, particularly to foreigners in France, is its use to indicate the collection of documents that you must put together in order to complete vital administrative tasks, from registering in the health system to finding somewhere to live.

When you begin a new administrative process, you will need to put together a collection of documents in order to make your application. Exactly what you need varies depending on the process, but almost all dossiers will include;

  • Proof of ID – passport, birth certificate or residency card. If a birth certificate is required check carefully exactly what type of certificate is being asked for (and don’t freak out if they’re asking for a birth certificate no more than three months old, it doesn’t mean you have to be born again).

Birth certificate: Why you need it in France and how to request one

  • Proof of address – utility bills are usually the best, if you’re on paperless billing you can log into your online account with your power supplier and download an Attetstation de contrat which has your name and address on it and also acts as proof of address
  • Proof of financial means – depending on the process you might have to show proof of your income/financial means. This can include things like your last three months payslips or your most recent tax return. If you’re house-hunting you might be asked for your last three quittances de loyer – these are rent receipts and prove that you have been paying your rent on time. Landlords are legally obliged to provide these if you ask, but if you can’t find them or it’s a problem you can also ask your landlord to provide an attestatation de bon paiment – a certificate stating that you pay what you owe on time.

Paper v online

The traditional dossier is a bulging file full of papers, but increasingly administrative processes are moving online, so you may be able to simply upload the required documents instead of printing them all out. 

If you have to send physical copies of documents by mail, make sure you send them by lettre recommandée (registered mail), not only does it keep your precious documents safe, but some offices will only accept documents that arrive this way. 

If you’re able to send your dossier online, pay careful attention to the format specified for documents – usually documents like rental contracts or work contracts will be in Pdf format while for documents like a passport or residency card a jpeg (such as a photo taken on your phone) will suffice. If you’re sending photos of ID cards, residency cards or similar make sure you upload photos of both sides of the card.

If you need scanned documents there is no need to buy an expensive scanner – there are now numerous free phone apps that will do the job and allow you to photograph the documents with your phone’s camera and convert them to Pdf files.

Some French government sites are a little clunky and won’t accept large files – if you get an error message telling you that the file you are uploading is too big, you can resize it using a free online photo resizing tool. 

Payment

If the process requires payment (eg changing address on certain types of residency card or applying for citizenship) you may be asked for a timbre fiscale – find out how they work here

House-hunting

If you are looking for a property to rent you will need to compile a dossier and if you’re in one of the big cities – especially Paris – landlords or agencies usually won’t even grant you a viewing without seeing your dossier first, so it’s always best to compile this before you start scanning property adverts.

The government has put together a tool called Dossier Facile which allows you to upload all your house-hunting documents to a single site, have them checked and verified and then gives you a link to give to landlords and agencies, which makes the process a little simpler.

Find a full explanation of how it works here.

Attestations

For foreigners, especially new arrivals, it’s often a problem getting together all the documents required. It’s worth knowing that if you don’t have everything you need, you can sometimes substitute documents for an attestation sur l’honneur, which is a sworn statement. 

How to write a French attestation sur l’honneur

This is a legally valid document, with penalties for submitting a false one, and needs to be in French and written in a certain format – the French government website provides a template for the attestation.

Vocab

Déposer un dossier – submit your file

Pièce d’identitie – proof of ID eg passport, residency card

Acte de naissance – birth certificate. 

Copie intégral – a copy of the document such as a photocopy or scan

Extrait – a new version of the document, reissued by the issuing authority

Sans/ avec filiation – for birth certificates it might be specified that you need one avec filiation, which means it includes your parents’ details. Some countries issue as standard short-form birth certificates that don’t include this, so you will need to request a longer version of the certificate

Justificatif de domicile – proof of address eg recent utility bills. If you don’t have any bills in your name you can ask the person who either owns the property or pays the rent to write an attestation de domicile stating that you live there

Justificatif de situation professionnelle – proof of your work status eg a work contract – either a CDI (permenant contract) or CDD (short-term contract)

Justificatif de ressources – proof of financial means, such as your last three months payslips (employers are legally obliged to provide these), other proof of income or proof of pension payments or evidence of savings.

Avis d’imposition – tax return. Some processes ask for this separately, for others it can be used as proof of resources – this is not a copy of the declaration that you make, but the receipt you get back from the tax office laying out your income and any payments that are required. If you declare your taxes online in France, you can download a copy of this document from the tax website. 

Quittance de loyer – rent receipts

Attestation de bon paiment – a document from your landlord stating that you pay your rent on time

Un garant – for some processes, particularly house-hunting, you might need a financial guarantor. This can be tricky for foreigners since it has to be someone you know reasonably well, but that person must also be living (and sometimes working) in France, and they will also need to provide all the above documents. If you’re struggling to find an acceptable guarantor, there are online services that will provide a guarantor (for a fee).

En cours de traitement – this means that your dossier has been received and is in the process of being evaluated. Depending on the process this stage can take anywhere between hours, months or even years (in the case of citizenship applications).

RDV – the shortened version of rendez-vous, this is an appointment. Certain processes require you to first submit your dossier and then attend an in-person appointment.

Votre dossier est incomplet – bad news, you are missing one or more crucial documents and your application will not proceed any further until you have remedied this.

Votre dossier est validé – your dossier has been approved. Time to pop the Champagne!

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