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How to get a mortgage in France

Thinking of buying the home of your dreams but wondering how to get a mortgage? Here’s everything you need to know about getting a mortgage in France in 2021.

7 min read

The factors banks consider when you apply for a mortgage

Before we start talking numbers, keep in mind that your chances of getting a mortgage depend on several criteria. Banks look closely at the following areas:

  • Your professional situation. Having a stable professional situation with a steady income can be an important factor in getting a mortgage. Permanent employment contracts are preferred by banks when it comes to lending money, so without this type of contract, it might be more difficult to get a mortgage. 
  • Your down payment. Another deciding factor is the amount you have saved for a deposit. In general, lenders look for a down payment of 10% of the mortgage amount from the borrower. At a minimum, you should plan to have enough to pay the notary fees. These range from 2% to 8% of the purchase price of your property.
  • Your debt ratio. This is the share of your income that would go toward repaying your mortgage, and usually should not exceed 35% of your income. However, depending on how much income you earn and the assets you have, the bank might accept a higher debt ratio—from 30% to 40%. Banks also calculate a “remainder for living (reste à vivre)”, which is the amount needed to cover your daily expenses. This can also affect the percentage of the debt ratio you’ll be granted.
  • Your ability to save. If you want the bank to put its trust in you by lending you a large sum, you’ll be expected to prove you can afford it. A well-stocked savings account or any other savings plan can go a long way in reassuring the lender that you’re able to save. It’s also a good idea not to use your overdraft in the 6 months prior to applying for a mortgage. 
  • Your age and state of health. The younger and healthier you are, the more likely lenders will be to grant you a mortgage. With the average length of a mortgage generally being 20 years, banks usually prefer to lend to people aged between 30 and 40 rather than pensioners. It’s likely you’ll need to complete a health questionnaire when applying for borrower insurance, which is often essential to get a mortgage. Your insurance could be refused if your state of health is deemed at risk.

Calculating how much you can borrow

Now that you’ve got a better idea of ​​the criteria for getting a mortgage, it’s time to get practical. Exactly how much can you borrow from the bank? To find out, you need to find out your borrowing capacity, which is calculated using the debt ratio. Read on to understand more about it.  

How to calculate your debt ratio

In concrete terms, the debt ratio for a mortgage is calculated by measuring your income in relation to your regular costs of living.

When it comes to your income, the following are taken into account—your net salary, your end-of-year bonus, any contractual bonuses, non-salaried income, annuities, commissions when you have a certain number of years of service, benefits (alimony, retirement, etc.), and certain forms of welfare.

As part of your regular costs, you should also consider any repayments of current loans or contributions to be paid. If you’re buying a main residence, the rent you pay won’t be taken into account, since your monthly mortgage repayment would take its place.

To get a clearer idea of how much you could borrow, you can use this mortgage simulator.

Additional costs for your mortgage

Have you checked how much you could borrow with the mortgage simulator? Then it’s time to consider the additional costs that go along with a loan in France. These are grouped under the annual percentage rate (APR). The APR includes:

  • Agency fees. If you’re using a real estate agency, expect to pay between 3% and 10% of the property price for their services.
  • Borrower’s insurance. This relates to death and disability insurance, which isn’t compulsory, but is often required by banks—and usually amounts to around 0.30% of your mortgage value.
  • Application fees. These are around 1% of the amount borrowed, but can be negotiable.
  • Guarantee. In addition to borrower’s insurance, lenders often ask for other forms of cover, such as an insurance guarantee. Expect to pay around 1% to 3% of the amount borrowed.
  • Possible brokerage fees, if you use a broker. Expect to pay up to 2% of the amount borrowed.
  • The interest rate (see the next section).

The APR makes it possible to compare different mortgage offers and to choose the one that suits you best.

Only notary fees aren’t included in the APR. These range from 2% to 8% of the property price and can be paid with a down payment.

Finally, to settle on your final budget for your real estate purchase, you’ll also need to estimate the monthly costs for the apartment or house, condominium charges—if you’re buying this type of property—as well as the costs of maintaining the property. To learn more, read our article on how much your dream home really costs.

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Find the best real estate interest rate

Interest rates affect how much you can spend on a house or apartment. That’s why it’s so important to get the best real estate rate you can, as it will lower the amount of interest you’ll pay the bank. The good news is, in recent years, interest rates in France have been historically low—around 0.1% for a 20-year mortgage. 

To get the best interest rate, you’ll need to meet as many of the criteria mentioned at the beginning of this article as possible—especially having a solid down payment, a stable financial situation, the ability to save, and a reasonable debt ratio. The negotiation of your real estate rate can also be affected by factors like whether you’re buying a property that would be easy to sell later on, and whether it’s consistent with your life plans. 

Consider putting the banks in competition with a broker. As well as ensuring your mortgage file is complete, brokers will have networks that allow them to negotiate the best mortgage rate for you.

Getting a mortgage with no down payment

Getting a mortgage without a down payment is definitely more complicated than when you already have a personal nest egg. If you’re at the start of your career, you may not have had time to put money aside, but don’t worry—it can still be possible to get a mortgage without a down payment, depending on the following factors:

  • Your age and professional situation. If you’re young and have a stable, skilled job, it’s more likely that banks will be able to offer you a mortgage with no down payment, since the risk of non-repayment is low.
  • Buying to rent. In this case, the rent paid should cover all or most of your mortgage repayment, and the risk of non-repayment is lower for the bank.
  • A low jump in charges. This is the difference between the monthly payments of your future mortgage and what you currently pay to rent. If your mortgage repayments would be the same or not much more as the rent you’re paying now, banks should be more inclined to give you a mortgage with no down payment.
  • Getting a zero-interest loan (taux à prêt zero, or PTZ). Set up by the government, this path to home ownership allows you to get a zero-interest loan to finance part of a house or apartment purchase, under certain conditions. However, this approach is means-tested and only possible for the purchase of your first main residence. Visit the Ministry of Economy’s website to learn more about PTZ loans. A zero-interest loan is considered a personal contribution, and can therefore strengthen your financing plan.

Now that you have what you need to find the best option to finance your new home, have a look at our other tips for becoming a homeowner.

Organize your finances with N26 

Ready to get your finances in check so you can finally buy your dream home? Saving has never been so simple with N26’s innovative features and deals with partner brands. All N26 You, N26 Smart or N26 Metal account holders can create up to 10 Spaces sub-accounts, where you can set aside money alongside your main account. Give each space a name and unique savings goal, then create a Rule to automate the savings process. Check out N26 Perks to access even more savings with special deals from the brands you love. Take a look at all the N26 bank accounts and find the one that’s right for you today. 

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