If you’re planning to finance a property purchase in France with a French mortgage, it’s worth making sure that your finances are in good order before you start the application process, as Simon Smallwood explains
What you need to know about the application process to ensure a successful outcome
Purchasing a property abroad is not a decision to be taken lightly. British buyers whose dream it is to buy in France often wait patiently for a number of years until they feel comfortable enough with their own circumstances and overall economic conditions to take the plunge. Given the current uncertainty surrounding the UK’s membership of the European Union, it would not come as a surprise if many of you were sitting on your hands and waiting for the result of the referendum before making your own move.
PROTECTING FROM UNCERTAINTY
Taking out a French mortgage can prove a very astute way of protecting yourself against some of the economic uncertainty resulting from the upcoming referendum, particularly concerning the euro/pound exchange rate. If you’re keen to buy, but you are worried about the current climate of uncertainty, we would strongly recommend that you consult an expert French mortgage consultant to find out how a French mortgage can protect you against market movements.
Nevertheless, there will still be plenty of you who would prefer to wait until after the referendum is out of the way before going ahead with a property purchase in France, which means that summer 2016 may prove to be a busy time for British buyers on the French property market. However, this is not to say that there is nothing for prospective buyers to do in the meantime.
You can scan and submit paperwork electronically
GOOD TIME TO BORROW
Many of you will wish to take advantage of the excellent rates currently offered by French lenders to non-resident borrowers. The European Central Bank reduced its benchmark interest rate to 0% in March 2016, and French mortgage rates are consequently at historic lows. Meanwhile, the banks are perfectly happy receiving mortgage applications from international buyers, and many of them have an attractive range of credit products designed for these borrowers.
In order to secure a French mortgage, you will have to submit a comprehensive application which essentially consists of documentation relating to your current financial situation. Banks out in France do not have access to UK credit checks, and request full disclosure from British borrowers concerning all financial assets, liabilities, income and outgoings. The banks also ask that you send over three months’ worth of statements for all bank accounts held under your name.
This may sound like an arduous task, but the banks are working to make the process quicker and simpler for applicants. Documents are rarely required in their original form, so you can scan and submit the paperwork electronically. Indeed, the one aspect that consistently causes the longest delay during the early stages of a mortgage application is the time taken by applicants to put together their file of paperwork. In preparation for a summer viewing trip, you should therefore think about putting aside all the financial documents and bank statements that you receive in the coming months.
Furthermore, be sure to think about how you manage your finances in this period. As mentioned, French underwriters need to see bank statements dating back over a period of three months. So what are they looking out for?
GET PAPERWORK IN ORDER
Firstly, French banks are very cautious about overdrafts. Such facilities are much less common in France than in the UK, and the use of an overdraft can be looked upon negatively, so think about making sure that your bank statements are in the black and keep them in a healthy condition for the foreseeable future.
Ideally, you might also choose to pay into a savings account each month. It also goes without saying that these lenders like to see as much evidence of savings as possible when you make an application. They will certainly want to see enough money to cover your deposit and purchasing fees, with a cushion left over so as to not over-stretch yourself.
Once you have the financial documentation in place, you will be in the position to apply for a financial pre-approval. This pre-approval, or ‘agreement in principle’, will provide peace of mind for vendors when you go over to France on your viewing trip. Approaching a vendor with the lender’s pre-approval already in hand proves that you are a serious, dependable buyer. As the funds have already been pledged by the lender, in effect it makes you a de facto cash buyer, putting you in the perfect position of strength when you enter into negotiations on the purchase price.
Hopefully this article has given you some food for thought regarding the preparations for your French property purchase. While it is perfectly natural to be cautious about the upcoming EU referendum, the likelihood is that – whatever the outcome – purchasing a property in France will remain a feasible and popular option for British citizens. To put yourself at the front of the queue, start taking the necessary steps, starting with obtaining preapproval for a French mortgage.
Simon Smallwood is joint managing director of International Private Finance internationalprivatefinance.com