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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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CRIME

French police launch new service to keep empty homes secure

Leaving your property empty puts it at risk of burglars or squatters and this is a particular worry for second-home owners, whose homes are often vacant for prolonged periods.

French police launch new service to keep empty homes secure

French police run a scheme called Opération Tranquillité Vacances which involves householders telling their local police that they will be away, so they can keep an eye on the property.

The scheme has run in various forms since 1974, but now an online platform has been set up allowing property owners to make their declaration in just a few clicks.

It’s largely targeted at French people who are going away over the summer and leaving their homes empty, but it’s not limited to French nationals and can be used all year around.

Under the scheme, householders and businesses can ask their local gendarmes to keep a watch over their properties while they are away for a period of up to three months.

READ ALSO How to get rid of squatters from your French property

Police and gendarmes patrols visit houses on their list at various times during the day or night, checking shutters, gates, and back gardens to make sure all is as it should be – and to act as a deterrent to any criminal groups checking the area.

The new online service is not limited to French nationals or French residents, but it does require a FranceConnect account to operate, meaning that you need to be registered in at least one French database (eg the tax office, benefits office or in the health system).

The form can be used to cover both main residences and second homes (résidence secondaire) but there is a limit of three months at a time for the property to be vacant.

You can find the form HERE and it can be completed between three and 45 days before your departure.

You can also register in person at your nearest police station or gendarmerie unit. Take ID and proof of address, such as a recent utility bill, if you do it this way.

Summertime is high-season for criminals in France, who target homes that have been left vacant while their owners are away on holiday.

Opération Tranquillité Vacances was introduced in 1974 as a means to keep crime rates down during the summer holiday period. It was extended to include other school holidays in 2009, and is now available all year round.

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