Fact Sheet & FAQ: French Mortgages for Non-Residents

• Fact Sheet Overview
• Key Facts (Eligibility, Types, Process, Features)
• Key Numbers (LTV, Rates, Deposit, DTI, etc.)
• Key Costs & Taxes (Purchase & Annual)
• Equity Release in France
• Key Considerations (Docs, Insurance, Risks, Structures)
• Example Scenario
• FAQ Overview
• FAQ: Eligibility for a Mortgage
• FAQ: Maximum Loan-to-Value (LTV)
• FAQ: Typical Interest Rates
• FAQ: Interest-Only Mortgages
• FAQ: Required Documentation
• FAQ: Time to Get a Mortgage
• FAQ: Life Insurance
• FAQ: Buying Through a Company or Trust
• FAQ: Taxes
• FAQ: Currency Fluctuations
• FAQ: Renting Out the Property
• FAQ: Tax Benefits of a Mortgage
• FAQ: Capital Gains Tax
• FAQ: Restrictions on Reselling
• FAQ: Moving to the Country
• FAQ: Changes to Laws
• FAQ: Using Financing from a Home Country Bank
• FAQ: Revaluation of the Property

Fact Sheet: French Mortgages for Non-Residents 

Key Facts:

Eligibility:

• Non-residents can obtain mortgages; no citizenship requirement.
• French banks lend to non-EU nationals, though with stricter conditions.
• Typical down payment: 20–30% minimum.

Mortgage Types:

• Repayment Mortgages: Monthly payments include interest and principal.
• Interest-Only (Prêt in Fine): Available through private banks; principal repaid at term-end.
• Private Bank Mortgages: Flexible, asset-backed, tailored for large loans (typically over €2 million).

Mortgage Process Timeline:

• Initial consultation & pre-approval (1–2 weeks).
• Property search & offer (variable duration).
• Signing Compromis de Vente (usually within 2 weeks after offer).
• Mortgage application & approval (4–8 weeks).
• Mandatory 10-day reflection period on the formal mortgage offer.
• Completion & funds release (~8–10 weeks total).

Mortgage Features:

• Fixed-rate loans popular due to long-term stability.
• Variable-rate options available, linked to Euribor.
• Loan terms typically range from 5–25 years; average duration 15–20 years.

Key Numbers:

Key Costs & Taxes (Beyond Mortgage):

Notary Fees:

• Existing Properties: Approximately 7–8% of the purchase price, covering transfer duties and notary fees.
• New-Build or Off-Plan Properties: Around 2–3% acquisition costs, plus VAT (20%) on the purchase price.

Annual Taxes:

• Taxe Foncière: Annual property tax; new constructions may be exempt for two years if declared within 90 days of completion.
• Taxe d'Habitation: Reduced or phased out for main residences; applicable for second homes.

French Wealth Tax (IFI):

• Applies to net property value exceeding €1.3 million.
• Mortgage debt reduces taxable property value.

Rental Income Tax:

• Non-residents taxed on rental income; mortgage interest deductible.

Capital Gains Tax (CGT):

• 19% plus social charges (17.2%).
• Full exemption after 22 years (CGT) and 30 years (social charges).

Equity Release in France

General Overview:

• Equity release is less common in France compared to other countries.
• Traditional equity release products (like lifetime mortgages in the UK) are rare.

Private Banking Options:

• For properties valued over €2 million, private banks may offer tailored equity release solutions.
• Typically, up to 50% of the property's current value can be released.
• Minimum loan amount: typically €300,000.

Costs and Considerations:

• Mortgage Registration Tax (Hypothèque): Higher costs apply as the new mortgage must be registered.
• Notary & Legal Fees: Approximately 1.5% of the new loan amount.
• Bank and Broker Fees: Around 1.5% of the new loan amount.
• Eligibility: Requires proof of income, net assets, and justification of fund use.

Limitations:

• Equity release options limited; complex arrangements are common.
• Traditional equity release schemes (lifetime mortgages) are rare.

Key Considerations:

Documentation Required:

• Identification (passport), proof of address.
• Income verification (3 months’ payslips or 2–3 years’ financial statements).
• Bank statements.
• Existing debt details.
• Translations required for non-French documents.

Life Insurance:

• Typically required by lenders to cover the mortgage amount.
• Costs vary by age and health; bank-offered policies are common but optional.

Foreign Currency Risks:

• Loans denominated in EUR; income in other currencies may affect affordability due to exchange rate fluctuations.

Ownership Structures (SCI, Trusts, Companies):

• SCI and SARL de Famille (French property-holding company): Commonly accepted.
• Foreign entities (trusts, companies): Less favoured, potentially impacting taxes, complexity, and loan terms.

Resale Considerations:

• No resale restrictions; capital gains tax applicable, particularly within first 5 years.
• Early mortgage payoff penalties possible (~3% of outstanding balance or 6 months’ interest).

Example Scenario (Illustrative):

• Property Purchase: Paris apartment, €2 million
• Mortgage: 70% loan-to-value (€1.4 million), 20-year fixed-rate at 4% interest
• Monthly Payment: Approximately €8,500 (Capital + Interest)
• Deposit & Fees: Approximately €600,000 deposit plus around €160,000 notary fees
• IFI Wealth Tax: Only €600,000 taxable initially due to outstanding loan balance

FAQ

Eligibility for a Mortgage

Who can get a French mortgage? Both residents and non-residents can apply for mortgages in France. Banks will assess your income, debts, and credit history (even if abroad) to determine eligibility. Generally, non-EU foreigners can obtain a French home loan but may face stricter requirements (such as higher down payments). Lenders also impose age limits—the loan must usually end by retirement age or around 70–75. Important: Most lenders require you to open a French bank account and obtain a fiscal number if you don’t already have one.

Foreign buyer conditions: French banks often ask that your total debt payments (including the new mortgage) do not exceed about 33–35% of your income (a rule enforced by French regulators). Some banks request additional collateral or savings for non-resident borrowers. Occasionally, banks require foreign borrowers to deposit 12–24 months of mortgage payments into a French account as a guarantee. Having French residency is not required, but being an EU/EEA citizen or having stable foreign income makes the process smoother. Property ownership in France does not grant residency rights—you must follow visa procedures separately.

Maximum Loan-to-Value (LTV)

How much can you borrow? The maximum LTV in France depends on residency and financial profile. Non-resident foreign buyers typically receive around 50–75% LTV, meaning a 25–50% down payment is required. Practically, many non-EU buyers find LTVs around 60–70% common. French residents (or EU citizens with local income) can often borrow up to 85% and sometimes even 100% of the property price (though 100% loans usually require excellent credentials or additional guarantees).

Interest-only loans and LTV: Interest-only ("in fine") mortgages generally offer lower LTVs, often around 50–60%, as the principal isn’t reduced during the term. Overall, plan for a substantial deposit—typically 20–40% for foreign buyers. Higher LTVs may be possible with strong income, low debts, or additional collateral.

Typical Interest Rates

Current rates: French mortgage rates have risen from historic lows. As of mid-2024, average rates on new housing loans were around 3.5%. Non-residents often face slightly higher rates (a small risk margin for foreign income). For example, non-resident rates in 2023 ranged ~4–5%, expected to ease toward 3.5–4% by late 2024. By comparison, rates a year earlier averaged ~2.9%, showing rapid changes.

Fixed vs. variable: Most French mortgages are fixed-rate, locking your rate for the full term (often 15–20 years). This stability is appealing since euro interest rates fluctuate. Variable-rate loans exist (mostly private banks, indexed to Euribor). Given current rates, fixed deals at around 3.5–4% are preferred. For instance, Q2 2024 fixed rates averaged ~3.5%. Special hybrid products (fixed/interest-only) might start around 2.3% for the interest-only portion, plus insurance costs.

Interest-Only Mortgages

Are interest-only loans available? Yes. France offers "in fine" mortgages—interest-only loans with principal repaid in a lump sum at maturity. These loans have strict conditions. Banks usually require significant pledged assets or investments equal to the loan amount, or a life insurance policy covering the principal. Hence, interest-only mortgages typically suit high-net-worth individuals or specific investments.

Typical terms: Interest-only periods typically run up to 10–15 years, commonly capped at 50–60% LTV. For example, a bank might lend 50% interest-only if you invest equivalent funds in their private banking division. Rates for interest-only loans are slightly higher than standard loans. Hybrid interest-only products might start around 2.3% (plus life insurance costs). You must plan to pay off the principal—usually through investments, refinance, or property sale.

French nuances: French banks almost always require an assurance-vie (life insurance) covering at least 100% of the loan amount (often 120%). The cost of this insurance and tied-up capital in investments makes true interest-only mortgages expensive. Interest-only mortgages suit financially robust buyers who meet collateral and insurance criteria.

Required Documentation

What paperwork do you need? French mortgages require extensive documentation:

• Identification: Passport.
• Proof of address: Utility bill.
• Income proof:
  • Employed: Last 3 payslips, employment contract, last 2 years of tax returns.
  • Self-employed: Several years of accounts/tax returns.
• Bank statements: Last 3–6 months, showing income/savings.
• Proof of funds: Bank statements for deposit amount.
• Specific French requirements:
  • Obtain a French bank account (for mortgage payments).
  • French fiscal identification number (if not already obtained).
  • Life insurance documentation (mandatory, with medical questionnaire).
  • Property details: Signed sale agreement (Compromis de Vente or Promesse), later property title and valuation.

Non-residents may need credit reports or bank reference letters. Documents must be translated into French by an accredited translator.

Tip: French banks can request detailed explanations (large transactions, rental income). Include a cover letter summarising your financial profile. Well-organised documents speed up approval.

Time to Get a Mortgage

How long does it take? Obtaining a mortgage in France typically takes 2–3 months from application to funds availability. Pre-approval (agreement in principle) might take around two weeks if your documentation is in order. However, the formal approval, including credit committee decisions and compliance checks, usually takes 4–8 weeks. Non-resident applications sometimes take longer, typically 8–12 weeks from application to formal offer.

Once you receive the official mortgage offer, French law requires a 10-day cooling-off period before acceptance. After this period, funds are released upon coordination with your notary, who manages payment at the property’s final sale completion.

How to avoid delays: Submit a complete file promptly, quickly address additional bank requests, and ensure your preliminary purchase agreement (Compromis de Vente) includes a financing contingency clause (usually 45–60 days). If delays occur, your notary can request an extension from the seller. Generally, plan for at least two months, adding extra time as a buffer.

Life Insurance

Is life insurance required? In most cases, yes—French lenders mandate life insurance covering at least 100% of the loan amount (often 120%), naming the lender as beneficiary. This policy ensures the loan’s repayment if you (or a co-borrower) pass away. The premium (typically 0.2–0.5% annually) is added to your monthly mortgage payments.

Key points:

• You are not obliged to buy insurance from your lender; French law permits choosing an external insurer provided the coverage is equivalent. Banks often offer group policies initially for convenience, though you may switch providers later (due to France’s Hamon and Bourquin laws).
• Life insurance usually covers both death and disability. Borrowers might insure 50% or 100% of the loan each.
• Important: Insurance costs increase significantly with age or pre-existing health conditions. For large loans, lenders may occasionally accept other guarantees (e.g., financial asset pledges), but life insurance is effectively mandatory for most mortgages.

Buying Through a Company or Trust

Can I use a Limited company, SCI, or trust to buy? Yes, purchasing through a company, particularly a French property-holding company like an SCI (Société Civile Immobilière) or an SARL de Famille, is common. However, banks prefer lending directly to individuals and may hesitate or impose stricter conditions on loans to foreign entities or complicated ownership structures.

Downsides:

• Higher stamp duty applies for non-transparent entities. Purchasing personally or via transparent SCIs incurs approximately 4.5% registration tax, whereas foreign entities typically face 7.5–9% transfer taxes.
• Foreign companies owning French real estate must declare shareholders annually or face a punitive 3% annual tax on property value.
• Trusts: France does not formally recognise common-law trusts for real estate ownership, subjecting trust-held assets to punitive taxes and additional complexities regarding inheritance and wealth taxes.

Summary: Most buyers purchase in their personal names. If a structure is necessary for inheritance, liability, or multiple investors, consult a notary or tax advisor first. If lenders agree to lend to companies, beneficial owners typically must personally guarantee loans.

Taxes

What are the most common taxes when buying property in France?

Purchase taxes:

• Resale properties: Total taxes approximately 7–8% of the purchase price, mostly stamp duty (~5.8%) plus notary fees.
• New-build properties: Lower fees, approximately 2–3%, as VAT (included in purchase price) replaces stamp duty.

Annual property taxes:

• Taxe Foncière: An annual local property tax, varying widely depending on location, property size, and commune-specific rates.
• Taxe d’Habitation: Mostly abolished for primary residences since 2023, but possibly applicable or surcharged on second homes.

Wealth tax (IFI): An annual real estate wealth tax applies to net property values exceeding €1.3 million, with sliding scale rates from approximately 0.5–1.5%. Mortgage debts reduce the taxable property value.

Rental income tax: Rental income, taxable in France regardless of residency, is subject to progressive income tax rates (up to 45%) plus social charges (17.2%). Expenses such as mortgage interest, taxes, and insurance are deductible, significantly reducing the taxable amount. Alternatively, furnished rentals under certain limits can benefit from the simplified flat-tax regime (Micro-BIC).

In summary, plan for upfront purchase taxes (7–8% resale), annual local taxes, and potential wealth tax exposure on high-value properties. Professional accounting advice is highly recommended.

Currency Fluctuations

What are the main currency and FX considerations when buying property in France? Your mortgage payments will be in euros, creating currency risk if your income or savings are in another currency (e.g., USD or GBP). Exchange rates significantly impact your effective repayment cost over a long-term loan.

Mitigation tips:

• Pay from euro-denominated assets or income, if possible.
• Regularly use currency specialists offering competitive exchange rates.
• Budget a buffer (e.g., a 10–20% currency swing scenario) to avoid shortfalls.

EU rules require banks to disclose currency risks clearly, although multi-currency mortgages are uncommon in France. Most buyers finance exclusively in euros.

Renting Out the Property

Can you rent out a home with a French mortgage? Yes, French mortgages typically allow or expect non-residents to rent properties. You must inform your insurance provider and obtain appropriate landlord coverage.

Long-term rentals: Standard French rental laws apply (e.g., unfurnished rentals initially lasting three years). Rental profits are taxable in France; however, expenses (mortgage interest, taxes, insurance, maintenance) are deductible, significantly reducing taxable income.

Short-term (holiday) rentals: Local regulations vary. Major cities (e.g., Paris) have strict short-term rental regulations (registration, maximum rental days). Ensure the property is adequately insured.

Taxation: Rental income from French property is taxable in France first, even if taxed abroad. EU/EEA non-resident landlords typically pay at least a flat 20%, while non-EU residents generally pay 30%, depending on treaties.

Renting is allowed and can financially benefit buyers by offsetting mortgage and property costs.

Tax Benefits of a Mortgage

Does having a mortgage help with taxes? France offers no standard mortgage-interest deduction for personal residences. However, two indirect tax benefits apply:

• Wealth tax (IFI) reduction: Mortgages reduce net taxable property value, lowering your IFI liability.
• Rental income offset: Mortgage interest is deductible from rental income, potentially reducing rental profit tax to minimal or zero, particularly in early years.

Mortgages help preserve liquidity for alternative, potentially tax-efficient investments, though professional advice is advisable to maximise tax efficiency.

Capital Gains Tax

When you sell, will you owe tax on the profit? Potentially, yes, unless it’s your primary residence (100% CGT-exempt). Non-residents pay 19% capital gains tax plus social charges (7.5–17.2%), totalling approximately 26.5–36.2% depending on EU/non-EU status.

Exemptions and reductions: Taper relief reduces taxable gains gradually over time. After 22 years, base CGT is exempt; social charges require 30 years for exemption. Quick resale (under 5 years) is fully taxable, with no reductions.

Careful timing significantly impacts your tax liability.

Restrictions on Reselling

France imposes no resale timing or ownership restrictions. However, practical financial considerations (e.g., early repayment penalties, CGT implications) may discourage rapid resale.

Moving to the Country

Owning French property does not grant automatic residency rights or visas. However, property ownership can support visa applications by demonstrating financial stability and accommodation availability. Residency permits must be obtained separately, following standard immigration procedures.

Changes to Laws

French real estate and mortgage laws evolve periodically. Key changes recently include stricter debt-to-income ratios (35%), mortgage term limits (25 years), and consumer protection enhancements. Keep informed through a notary or financial adviser.

Using Financing from a Home Country Bank

Foreign lenders generally cannot directly secure loans against French real estate. Common alternatives: equity release or personal loans from your home country, converting you effectively into a cash buyer in France. French mortgages typically must be registered through a French notary.

Revaluation of the Property

French banks generally do not periodically revalue mortgaged properties after initial appraisal. Your loan terms remain fixed unless refinancing occurs. Market fluctuations typically do not affect your mortgage directly.