You have a real estate project in France. Perhaps you're looking to settle down, invest wisely, or secure a vacation home. France's very low mortgage rates are a real advantage for potential buyers. Let's dive into how it all works.
What are the specificities of mortgage rates in France?
In France, nearly 90% of mortgages are fixed-rate, meaning the interest rate remains constant throughout the loan term, typically spanning 10 to 25 years.
This practice is rather rare in Europe, where variable-rate mortgages are prevalent in many other countries. Opting for a fixed-rate mortgage offers enhanced security and, most importantly, clear visibility into your payments—an aspect highly valued by borrowers.
Why are mortgage rates lower in France?
Currently, mortgage interest rates in France stand out as being lower than those in the rest of Europe, driven by several key factors:
- Strict banking regulations: France maintains robust prudential regulations for its banking sector, ensuring that banks manage risk prudently. This careful oversight allows banks to offer lower interest rates compared to countries with less stringent regulations.
- Highly competitive market: The French mortgage market is fiercely competitive, prompting banks to vie for borrowers by offering attractive terms and rates.
- Government housing support: The French government plays a role in maintaining affordable property interest rates through initiatives like the zero-rate loan (PTZ*), which provides housing support to buyers.
*To qualify for the zero-rate loan (PTZ) in France, you must be a French tax resident with your tax domicile established in France. Also, you mustn't have owned your primary residence in the two years leading up to the loan offer.
These combined factors create a favorable environment for borrowers in France, making property ownership more accessible with lower mortgage interest rates.
What are current mortgage rates?
Find out the best actual mortgage rates in France
Please be aware that the pages you are about to access are written in French. If needed, consider using a translation extension to convert the content into your preferred language for easier comprehension and exploration.
Good to know
If you're considering a purchase, you may have noticed that mortgage rates in France experienced a notable increase during 2023. While they reached higher-than-usual levels, they have been on a downward trend since the start of 2024.
What are the specificities of mortgage rates in France?
The good news is that they've already begun to decrease and are expected to continue falling in the coming months. In May, average rates across different mortgage profiles dropped to 3.54% for 15-year loans, 3.64% for 20-year loans, and 3.75% for 25-year loans—a significant decrease of -0.13 points overall.
Curious about how your personalized tax rate is evolving? Stay informed with our Rate Alert service! Subscribe today and receive email updates of your updated rate every two weeks. Please note that the content of these emails is in French.
What is a mortgage interest rate?
When you get a mortgage to purchase a home, the mortgage interest rate is the percentage at which the lender charges interest on the amount borrowed (the principal). This rate is pivotal as it directly influences the total cost of borrowing over the loan's term.
How is it calculated ? When you apply for a loan, your banker will present you with a personalized interest rate that is tailored to your unique circumstances. This rate can vary based on specific factors considered during the calculation. What exactly influences the determination of your interest rate?
In France, unlike many other countries, banks prioritize the financial analysis of borrowers and their financial situations rather than conducting detailed assessments of the properties being purchased. That's why your financial situation and net income play a crucial role in assessing your ability to repay.
The bank considers various sources of income, including your salary from employment, retirement pension, stable entrepreneurial income (for at least 3 years), and rental income from investment properties. These factors are carefully reviewed to determine your financial stability and ability to manage loan repayments.
The bank will factor in your downpayment when assessing your loan application. This refers to the amount of money you intend to invest in the property project. For individuals living in France, it's typically recommended to contribute at least 10% of the property's value that you wish to purchase.
However, if you're not a resident of France, the requirements are more stringent. The bank will require a 20% deposit on the property's cost along with demonstrating that you have an additional 20% of the property's cost in savings. These criteria ensure a solid financial commitment and stability for non-resident borrowers.
The bank will also assess your debt ratio to determine your loan eligibility. This means examining any existing loans you have in France and abroad. Your debt ratio shouldn’t exceed 35% of your total income.
Additionally, your professional stability will be evaluated by the bank. They will consider factors such as the stability of your income and your capacity to make repayments over time.
Mortgage costs in France
The expenses coming with mortgages in France vary based on several factors and are typically higher for existing properties compared to the newly built. When purchasing a property in France, anticipate total transaction costs around 10% of the purchase price, including taxes.
Mortgage costs are :
- Mortgage application fees: Generally between 0.5% and 1.5% of the loan amount
- Mortgage broker fees (if applicable): Depends on loan amount
- Notary fees: Typically around 2-3% for new properties and 7.5% for properties older than five years
These costs are essential considerations when planning your property purchase in France.
How much can you borrow for a French mortgage?
Your eligibility for a mortgage in France depends on your residency status. For non-residents, the country of residence plays a crucial role in accessing mortgage options.
Banks are more inclined to lend to individuals from European Union (EU) and European Economic Area (EEA) countries, as well as from the USA, Switzerland, Canada, Japan, Australia, and New Zealand. These borrowers are viewed favorably due to their strong financial profiles and historically low default rates.
American residents are viewed as solid borrowers but suffer from additional regulatory requirements.Special agreements like FATCA (Foreign Account Tax Compliance Act) have been established between the United States and France to facilitate the exchange of banking and tax information, aiming to prevent global tax fraud. Therefore, French financial institutions are required to disclose banking data of US persons with accounts exceeding $500,000 to the US government, which can deter banks from lending to such profiles.
On the contrary, individuals residing in tax havens face challenges due to difficulties in verifying banking details and income sources.
Additionally, geopolitical factors can impact mortgage eligibility. Some countries experiencing crises may be temporarily excluded by banks to mitigate risks related to money laundering. The list of countries considered at risk currently includes Afghanistan, Belarus, Burma/Myanmar, North Korea, Eritrea, Iraq, Iran, Libya, Pakistan, Somalia, Sudan, South Sudan, Syria, Ukraine, Venezuela, and Yemen.
How to get the best mortgage rate?
To lock in the most competitive mortgage rate, you'll want to leverage your financial profile to the fullest. Prepare a strong application that highlights your stability and creditworthiness.
Focus on connecting with banks that specialize in lending to borrowers like you. This targeted approach saves time and increases the likelihood of securing favorable terms amid market competition.
As you are aware, it can be challenging to identify suitable banks as a non-resident. In these situations, it’s worth using a specialized broker like Pretto.
Who is Pretto?
Pretto is not your typical brokerage—it's a 100% online platform that completely transforms the property buying process. No matter the scope of your project, we've revamped the entire experience with friendly support and cutting-edge online tools. Say goodbye to obstacles and act on your real estate goals.
At Pretto, we cultivate strong relationships and partnerships with 100 French banks, giving us the edge to secure the finest loan deals across France through expert negotiations.
Choosing Pretto means handing over to us the paperwork hassle. Our team specializes in projects for non-resident borrowers, mastering all the specific criteria to streamline your loan application process. Plus, we're fluent in English, and offer a simulator in English tailored for non-resident and resident conditions.
Working with a leading broker like us is your ticket to the best rates. We understand the banks' intricacies, we're experienced in navigating their processes, and we excel at showcasing your potential to lenders.
Here's how you can make it happen:
- Explore with free tools and services: Leverage our suite of free tools and services to kickstart your journey.
- Simulate your loan: Use our intuitive loan simulator to visualize your options and tailor them to your needs.
- Expert advice at your fingertips: Consult with your dedicated Pretto expert who will provide personalized guidance and support.
- Secure the best loan: Sign off on the loan that's perfect for you, backed by our expertise and extensive lender partnerships.
