French Mortgage Rates: How Much Does a Mortgage Cost in France?

The French mortgage market has long been renowned for its low rates and the rumours are true! France has one of the world’s largest mortgage markets and it has remained a stable and growing market over several decades—a fact no doubt due to its large majority of fixed-rate repayment mortgages.

Since 2011, interest rates on French mortgages have been steadily falling, reaching historic lows in 2019. As of September 2020, average French mortgage interest rates are around 1.5% to 2.5%, and these rates are often also extended to non-resident buyers. Rates can fall below this too, especially for low-risk buyers and high-net-worth individuals.

Locking in long-term rates on a low-interest mortgage is an attractive proposition for both French and international buyers, especially for those buying in weaker currencies, such as Sterling, which have the potential to later improve against the Euro.

However, as of the beginning of 2021, the mortgage market is tighter than ever, meaning lenders are less likely to take on higher risk borrowers, particularly non-residents. This doesn’t mean getting a French mortgage is off the table, but it means that it’s more important than ever to present a solid application.

For international buyers, there are a number of factors that will be taken into consideration during your mortgage application that can affect not only whether your mortgage will be approved, but the rates offered.

Once you have determined whether you are eligible for a French Mortgage, there are a number of things you can do to secure the best rates. French lenders are historically risk-averse, which means the more you can prove yourself to be a low-risk borrower, the better your chances.

1. Present a solid financial profile

Applicants deemed the lowest risk are not only those that can prove sufficient funds, but those who can demonstrate long-term financial stability. An important point to remember is that French lenders do not base their assessment on your credit score. In fact, due to France’s strict debt-to-income requirements (read more about that here), they tend to frown upon credit.

A low-risk borrower would be one with a sufficient and stable income, substantial assets, a degree of liquidity, and minimal debts. Consolidating debts, paying off small loans (such as car loans), and reducing monthly liabilities (existing mortgages and rents) to a minimum will all put you in a much better position for your French mortgage application.

In the wake of the Covid pandemic, lenders are no longer considering self-employed borrowers from the United States and other non-EU countries; self-employed borrowers from the UK and EU should prepare for far stricter eligibility criteria than before.

2. Put down a sizable deposit

Borrowers putting down a sizable deposit are often seen as lower risk and may benefit from lower rates accordingly. International buyers are likely to be required to put down a minimum deposit of 20% (for British or EU residents) or 50% (for American or other non-EU residents).

Remember it’s the Loan-to-Value (LTV) rate that’s important, rather than the loan amount. In 2021, French lenders won’t typically consider mortgage loans of less than €150,000 for British and EU buyers or €250,000 for US or other non-EU buyers. While every situation is unique, a high-value mortgage with a low LTV is likely to attract the best deals (providing of course that you have the financial profile to back it up).

3. Free up some cash

As previously mentioned, French lenders tend to value liquidity more than financial assets, so freeing up some capital and showing evidence of savings can strengthen your negotiating position.

4. Select the most favourable mortgage type and term

Whether you choose a fixed-rate or variable-rate mortgage, and the length of the mortgage term will also affect the interest rate that you will be offered. Variable-rate mortgages and shorter-term mortgages typically benefit from lower interest rates. However, that doesn’t necessarily mean it’s the best choice for you, so be sure to do your homework first (our article on French Mortgage Types is a good place to start).

5. Invest in low-risk property

French lenders also place emphasis on the property itself and—you’re probably getting the idea by now!—low-risk always has better prospects. But what is a low-risk property? Essentially, a property with a high re-sale potential and value, meaning that in the worst-case scenario, your property would be a cinch for your lenders to sell and recover their investment. Newer properties in sought-after areas such as Paris, the Alps, and the Côte d’Azur for example present a much lower risk for lenders than a remote rural farmhouse in a state of disrepair that’s already been on the market for several years before you decided to buy it.

If your situation differs from what French lenders consider the ‘norm’ or you want to maximise your chances of a successful mortgage application, it’s highly recommended to seek advice from a mortgage adviser or use the services of an independent mortgage broker.

There are three main factors to consider when calculating the cost of a French Mortgage (or any mortgage for that matter):

1. The overall cost of your mortgage (i.e. the total loan amount plus the total interest paid), which is determined by the interest rate and mortgage term.
2. The monthly payments that you will make to your mortgage lender. These will also be determined by the interest rate and mortgage term, along with loan amount.
3. The cost of setting up your French mortgage.

Use our French Mortgage Calculator to get a rough estimate of your monthly fees, depending on your mortgage amount, mortgage term, and interest rate.

As a general guide, expect to pay around €500 a month for every €100,000 borrowed on a 20-year repayment mortgage. For an interest-only mortgage of the same term, this would be around €200 per €100,000 borrowed.

There are two main costs associated with setting up your French mortgage. First, there is the mortgage registration fee, which is paid to your notaire (note that this is separate from the notaire’s fees you will pay on your property purchase). Generally, this is around 2% of the loan amount for a conventional charge or around 1% for a Priority Lien Charge (available only on older properties).

There is also a lender’s arrangement fee paid directly to the mortgage lender—this is typically up to 1% of the loan amount but may be capped on larger mortgages.

Additional fees

All French lenders require you to take out a life insurance policy to clear the mortgage balance in the event of your death. The fees for this are typically paid monthly, so be sure to account for this in your monthly budget.

If you choose to use a mortgage broker, there may be additional broker fees too.