Mortgage Eligibility as a US or UK buyer in France

Alistair Lockhart looks at how both Brexit and COVID have impacted eligibility for French mortgages, and offers advice on remortgaging to undertake renovation works…

Can US buyers get a French mortgage for a property?

I have heard that it is difficult for US buyers to obtain a French loan. Why is this and what is the impact of COVID if any?

Since 1 July 2014, the Foreign Account Tax Compliance Act, known as FATCA, is an article of the US tax code which has imposed heavy obligations on foreign financial institutions. Designed to counter tax evasion, this framework requires French banks to send information about bank accounts held by US taxpayers to the authorities.

The effect on the French mortgage market for US taxpayers has been noticeable over the last six year. Most European banks offering retail mortgages (as distinct from private banks) now refuse credit requests from US persons, no matter the income or assets of the borrowers.

Pre-COVID, FrenchEntrée, through its network of independent brokers, was able to source several loans for US citizens or taxpayers. Whilst it is still possible to obtain a loan, in a post-pandemic world it is even more challenging. Loans to foreign buyers have tightened significantly as French banks looked to mitigate risk even further in uncertain times.

As a US applicant, in addition to meeting the usual debt-to-income ratio rules, you must also:

a) be borrowing at least €250,000

b) on the basis that the maximum loan-to-value is 50%, you would need a down payment of at least €250,000 against a property valued over €500,000

c) be employed, not self-employed

d) be aged under 55 upon application.

Getting a French mortgage as a Brit…

I want to buy a holiday home valued at €130,000 and borrow the maximum I can against it with a French mortgage. I am a British citizen with an income sufficient to cover the repayments. Is this possible?

Prior to Brexit and COVID the answer would probably have been more positive than it is now. With no Financial Services trade agreement formally in place between the UK and France post-Brexit, French institutions are increasingly nervous about lending to British citizens. As a result, the minimum loan amount for British borrowers has increased from €100,000 to €150,000. If the borrower has a good financial profile, they should still be able to borrow 75% to 80% of the property’s value.

We are therefore recommending to our British clients that to even be considered for French mortgage eligibility, they need to be looking at properties valued at €180,000 or higher. Unfortunately, anything less and the banks simply won’t consider it. Maybe when a completed Financial Services agreement is in place and the exposure is lower for French banks, the threshold might return to €100k – watch this space!

Can we re-mortgage our French home?

I am resident in France and have an existing mortgage on our main property. We would like to renovate a barn, so will it be possible to re-mortgage or drawdown equity to do this? We are in our mid-50s with pension income.

Possibly, but it will depend on a number of factors. It is generally not possible to have two mortgages on one property (i.e. you can’t keep your existing mortgage and bolt on a smaller loan) so you will need to re-mortgage entirely and pay back the first charge. You will therefore need to be able to demonstrate you have sufficient income – today – to pay back the total amount being borrowed. If you have emigrated to France and your income has reduced, you may not wish to do this and find another solution for renovating the barn.