Do French banks lend to non-resident foreigners? Answer: not all, but yes, some French banks do indeed finance the purchase of a home in France for non-residents.
Now that you are reassured, discover in this article:
the agreements between France and other States;
the documents to present to a French bank;
the debt rates that should generally not be exceeded;
the withdrawal period;
borrower insurance;
the interest of a multilingual broker to facilitate your loan application in the French territory.
Are there agreements between countries to grant a mortgage loan to a non-resident?
Among the things you need to know before buying a home in France: bilateral tax treaties and European directives on cross-border loans concluded between France and the State where you officially reside.
Bilateral tax treaties
States conclude them to regulate the taxation of individuals or legal entities residing in one of the signatory countries and receiving income in the other.
Article 4 B of the General Tax Code specifies that a person has their tax domicile in France if, among other things, they have their home or principal place of residence there; carry out a principal professional activity there or have their centre of economic interest there; are an agent of the State, local authorities or the hospital public service who works abroad, not subject to personal tax in that country on all of their income. |
Bilateral tax treaties serve, among other things, to define the rules of tax residence and to avoid double taxation, among other things for possible rental income. A treaty defines which country has the right to tax and at what level, or how to distribute this taxation.
If a non-resident foreigner buys real estate in France and receives rent, the bilateral treaty determines whether this income will be taxed in France, in his country of origin, or partially in both.
In the case of a tax residence defined in Germany, for example, the property income received in France is taxed in France (location of the property). However, Germany takes this taxation into account to avoid double taxation thanks to a tax credit.
The majority of tax treaties, including the one signed between France and Germany, are based on model tax treaties developed by the OECD (Organisation for Economic Co-operation and Development) to resolve situations where a person could be considered a tax resident in two countries simultaneously.
These criteria make it possible to determine in a progressive manner the country in which a person must be taxed on all of their worldwide income, by examining:
The permanent home (where the person has a permanent home);
The centre of vital interests (where their main economic and family ties are located);
The habitual place of residence (where the person spends the majority of their time);
Nationality (if the other criteria are not sufficient to decide);
The agreement between the tax administrations, as a last resort.
European directives on cross-border loans
They regulate and facilitate access to credit for borrowers who do not reside in one EU country and apply for loans in another.
In particular, they require lenders to provide clear, comparable and detailed information to the potential borrower, in particular on the additional costs related to the loan as well as the percentage rate of charge (TERG) or the annual percentage rate of charge (APR). "In order to create a genuine internal market ensuring a high and equivalent level of protection for consumers, this Directive lays down provisions that should be harmonised as much as possible concerning the communication of pre-contractual information by means of the standardised format of the European Standardised Information Sheet (ESIS) and the calculation of the APR", according to the Mortgage Credit Directive 2014/17/EU.
These European directives also provide specific guarantees to prevent exchange rate fluctuations from having an excessive impact on borrowers.
What documents are required by banks to prepare your mortgage application?
Documents requested from French residents, non-residents or expatriates
To finance a real estate project, banks may request these documents from non-residents:
Identity documents: national identity card, or copies of passports and residence permits of borrowers;
Bank statements: statements from the last few months to show the current financial situation;
Proof of regular income from a stable job or investments. For foreigners, these documents must be translated and certified. Note that banks generally prefer borrowers with income in euros to avoid exchange rate risks;
Tax notice: latest tax notice to verify declared income;
Copy of employment contract: if applicable, to confirm professional situation;
Amortization tables: if you already have other credits, the amortization tables to assess your borrowing capacity;
Proof of address: recent utility bill to prove the place of residence;
Copy of rental contracts: if you are renting your current accommodation, rental contracts for the last few years;
Amount and proof of personal contribution: to put all the chances on your side, a contribution of 20 to 30% is strongly recommended. The larger the personal contribution, the more likely the loan application file is to be accepted.
A bank will often ask for the residence permit of the borrower who is not a French resident
In France, the regulations concerning the granting of real estate loans do not make a formal distinction between residents and non-residents, but banks may impose additional conditions for non-residents, such as the presentation of a residence permit, especially if the borrower is a foreign citizen from outside the European Union (EU) or the European Economic Area (EEA).
Also discover the list of documents that you need to gather for a property purchase in France, in particular the financing certificate that the bank that finances your loan can issue to you, in order to reassure the seller about your borrowing capacity. |
What is the maximum debt ratio to obtain a mortgage in France?
In France, the debt ratio is one of the loan conditions.
The maximum recommended (and often followed by banks) is 35% of net income. This limit includes all monthly financial charges related to current loans (mortgage, consumer credit, etc.) compared to household income.
For comparison, in the United States, for example, the total debt ratio to obtain a loan should not exceed 43% of monthly income. This figure is at least often cited by the Qualified Mortgage Rule implemented by the Consumer Financial Protection Bureau (CFPB).
In France, the High Council for Financial Stability (HCSF) allows some flexibility for real estate loans related to the purchase of primary residences, but this exception on the maximum debt ratio does not apply systematically and remains conditional on a thorough assessment of the borrower's financial situation.
In France, banking institutions also calculate the remaining amount to live on using this formula: Remaining amount to live on = Net monthly income − Monthly fixed charges. These expenses may include rent (if the borrower does not purchase their primary residence), other outstanding loans, insurance, etc.
Is there a withdrawal period after signing a mortgage loan contract?
"The borrower may withdraw without giving reasons within a period of fourteen calendar days from the day of acceptance of the credit contract offer [...]", according to Article L312-19 of the french Consumer Code. If he cancels his contract within the time limit, the loan applicant does not have to pay any penalties to the lender.
What do you need to know about borrower insurance in France?
Borrower insurance protects both the borrower and the bank in the event of borrower default due to unforeseen events such as death, disability, incapacity for work or loss of employment.
Do not confuse "borrower insurance" and "loan guarantee":
Borrower insurance protects against the risk of borrower default in the event of unforeseen situations. The insurance may include guarantees such as death insurance, disability insurance (total or partial) or job loss insurance. In the event of an event covered by the insurance, the insurer will cover all or part of the loan repayments.
The loan guarantee protects the lending institution (the bank) against the risk of non-repayment of the loan by the borrower. The main guarantees include the mortgage (a security interest on real estate that is used to pay a debt), the lender's privilege (in the event of non-repayment of the loan, the lender can be reimbursed as a priority from the proceeds of the sale of the real estate) and the surety (by a surety company such as Crédit Logement which would guarantee 1 in 3 loans). If the borrower can no longer repay the loan, the bank can recover its money by calling on the guarantee.
Taking out a loan without borrower insurance: is it legal?
Yes, in France, borrower insurance is not legally required to obtain a mortgage loan.
However, most lending institutions require this insurance to guarantee the repayment of the loan in the event of the borrower's default.
Can you change your borrower insurance whenever you want in France?
Yes, the Lemoine law allows any borrower (tax resident or not) who has taken out a mortgage loan to cancel their borrower insurance at any time, free of charge, in order to change it.
"This notice indicates the possibility for the borrower to terminate the insurance contract at any time from the signing of the loan offer", specified law n° 2022-270 of February 28, 2022 for fairer, simpler and more transparent access to the borrower insurance market (Lemoine law).
Why use a specialized broker for your mortgage application as a non-resident?
Iddyl Property, a multilingual real estate agency for buying real estate in France, works with French and bilingual real estate brokers. The latter work with institutions financing real estate purchases for non-residents.
Using a French broker can offer several advantages, especially when you are a foreigner:
Local expertise:
French brokers have in-depth knowledge of the specificities of the local real estate market, interest rates and loan conditions in France. They can guide you towards the best offers suited to your situation.
Access to banking networks:
Brokers often have privileged relationships with various banks and financial institutions. This can increase your chances of obtaining a loan and benefiting from advantageous conditions, even as a foreigner.
Time saving:
A broker takes care of all the administrative procedures, from putting together the file to negotiating the loan conditions. Goal: Save time and energy, especially if you are not familiar with the French banking system and cannot travel.
Personalized advice:
A broker can analyze your financial situation and specific needs to offer you tailor-made solutions. They can also advise you on the best strategies to optimize your loan application.
Language and communication:
If French is not your first language, a bilingual broker can facilitate communication with banks and help you understand the terms and conditions of the loan.
Learn more about borrowing and buying real estate in France:
To find out more, you can consult the FAQ on financing a property in France and our other blog articles dedicated to non-resident real estate buyers.
Komentar