Post by Sapphire Capital on Jul 17, 2008 6:14:22 GMT 4
What has changed with mortgages in France since the credit crunch?
14 July 2008 - Sophie Richards
It has been almost a year now since the economic climate has been affected by the credit crunch that started with the crises in the subprime market in September 2007. As a consequence, as a buyer of a property in France, it is right to wonder whether this has changed anything when it comes to borrowing money in France for your proposed purchase.
The good news is that you can feel reassured and go ahead with your project; there have not been many changes over the past year. Furthermore, the lending criteria has become more liberal to help buyers. There is great faith in the strength of the property market in France.
First of all, the lenders now offer loan to value up to 90% of the purchase price including the agency fee while it was 80% a year ago. The fact that you can borrow more in France will, therefore reduce your deposit and the amount of money that you have to transfer. This is a saving in itself while the cost of the euro is so high.
Recently the French mortgage providers increased the interest rates offered to their borrowers. This increase simply reflects the economic situation. You can be reassured that the lending criteria have not changed and that lenders are still willing to finance non-resident clients. Basically we are looking at a classic repayment mortgage product with a fixed rate over 3 years at 5.20%. A repayment mortgage product with a variable rate would start at 5.35%. On an interest only basis the interest rate would start from 5.65% on a fixed product and from 5.30% on a variable product. Despite this slight increase the interest rates offered are still lower than those in the UK.
Lastly, some lenders do not proceed to a valuation of the property but instead use a guarantor. This avoids any security taken on the property and the fee related. In the case of default of payment, the guarantor will pay the lender and then will find an arrangement with the borrower for him to pay back the guarantor. If you can’t meet the repayments of the mortgage for any reason, you still keep the property.
To conclude, despite the credit crunch, French lenders are continuing to attempt to attract more clients by offering a more flexible approach with their mortgages and helping you to live your dream of buying a property in France.
14 July 2008 - Sophie Richards
It has been almost a year now since the economic climate has been affected by the credit crunch that started with the crises in the subprime market in September 2007. As a consequence, as a buyer of a property in France, it is right to wonder whether this has changed anything when it comes to borrowing money in France for your proposed purchase.
The good news is that you can feel reassured and go ahead with your project; there have not been many changes over the past year. Furthermore, the lending criteria has become more liberal to help buyers. There is great faith in the strength of the property market in France.
First of all, the lenders now offer loan to value up to 90% of the purchase price including the agency fee while it was 80% a year ago. The fact that you can borrow more in France will, therefore reduce your deposit and the amount of money that you have to transfer. This is a saving in itself while the cost of the euro is so high.
Recently the French mortgage providers increased the interest rates offered to their borrowers. This increase simply reflects the economic situation. You can be reassured that the lending criteria have not changed and that lenders are still willing to finance non-resident clients. Basically we are looking at a classic repayment mortgage product with a fixed rate over 3 years at 5.20%. A repayment mortgage product with a variable rate would start at 5.35%. On an interest only basis the interest rate would start from 5.65% on a fixed product and from 5.30% on a variable product. Despite this slight increase the interest rates offered are still lower than those in the UK.
Lastly, some lenders do not proceed to a valuation of the property but instead use a guarantor. This avoids any security taken on the property and the fee related. In the case of default of payment, the guarantor will pay the lender and then will find an arrangement with the borrower for him to pay back the guarantor. If you can’t meet the repayments of the mortgage for any reason, you still keep the property.
To conclude, despite the credit crunch, French lenders are continuing to attempt to attract more clients by offering a more flexible approach with their mortgages and helping you to live your dream of buying a property in France.