Workers’ guide to mortgages

Whether you work in France, the UK or a far-flung corner of the guide, Jo Cowling’s guide will help you find the right mortgage

There was once a time when British property buyers in France invariably fell into one of two categories: those purchasing a holiday home and those immediately planning to retire to France.

Those who chose to take out financing in France would either support the mortgage with an income from their existing employment in the UK or their pension. These were therefore fairly straightforward cases for French lenders to assess, in terms of calculating the size of mortgage available to the buyers.

Nowadays, however, things are rather more complicated. French properties no longer just represent holiday residences or retirement homes to British buyers; they are also bought as lettings investments, both long and short term, or used as pieds-à-terre for business trips.

Furthermore, the typical British buyer in France may no longer be a full-time resident of the UK. It is just as likely that they work abroad, and French banks are now used to receiving applications from British buyers who live all around the world.

The lenders’ task in assessing what they deem to be a reliable borrower has consequently become more complex. Let’s have a look at a few different factors which will be taken into consideration.

NATIONALITY

If you are British, this will immediately tick a box for French lenders as they are accustomed to dealing with mortgage applications from British borrowers. If you are not a UK national, however, do not fear as French banks are actually more interested in your country of main residence.

The UK is, logically enough, looked upon positively as a borrower’s country of main residence. The banks will study your employment situation and take all of your income into consideration when calculating affordability for the mortgage. Employed or pensioned applicants will need to submit P60 documents in support of their files, while self-employed candidates are obliged to provide two or three years of tax returns.

French mortgages are still widely available for self-employed applicants who live in Britain. However, it has become increasingly difficult for people who are self-employed further afield to access credit in France, in particular those based outside the EU. Such applications would be dealt with individually.

WORKING OVERSEAS

With respect to applicants employed around the world, three things are important:

1. Where is your country of main residence?

2. Who is the employer?

3. What is the type of employment contract?

Generally speaking, your country of main residence in itself can only rule you out if you live in politically unstable or war-torn areas. Under these circumstances, it is difficult to secure the life insurance which the borrower is obliged to assign to the debt. Otherwise, the country tends to carry less importance on this than on the applicant’s employer.

In other words, French lenders will look to assess the risk attached to the organisation that is paying the applicant’s wage. Someone who earns a reasonable salary with Barclays in the Middle East, for example, is considered a stronger candidate than someone who is on a large wage for a small local company there.

Broadly speaking, French banks will be most comfortable lending to employees of multi-national organisations whose headquarters are based in Europe, the US or Australia.

EMPLOYMENT CONTRACTS

The final issue for applicants who are no longer based in their country of origin relates to the type of employment contract they have.

French lenders will be most comfortable lending to candidates who are on open-ended, permanent contracts. The presence of expat benefits such as paid-for accommodation can also help to reassure the underwriters further.

At the other end of the scale are fixed-period, short-term contracts. These are viewed with more caution by lenders, as they are not deemed to provide the adequate level of job security. Candidates in this position can access credit in France, but will need to be very thorough when presenting their application. Ideally, this would include documented evidence of contracts going back five or 10 years, proving an established history of continuous employment in the same sector.

Of course, in reality, this is not an exact science and there tends to be a certain level of flexibility with different banks. Rather than refuse an application outright, the lender may demand a higher initial down payment from the buyer, thereby reducing the mortgage’s loan-to-value ratio.

A fully-employed British buyer in the UK can expect to have access to 85% LTV mortgages in France, whereas those with more exotic residential and professional circumstances should plan to make a larger payment upfront.

The best advice is to consult a reputable French mortgage broker as early on in the process as possible. The broker will be able to assess your circumstances in relation to the different lenders, without going through a formal application. Once the most suitable bank has been identified, they will also guide you through the borrowing process.

Jo Cowling is head of the French team at International Private Finance

Tel: 0207 484 4600

www.internationalprivate.com