Looking at the important differences between mortgages in the UK and France

Miranda John is director of international property finance at mortgage broker SPF Private Clients

If you require a mortgage, French banks will lend to non-residents but borrowers should be aware that there are important differences between the UK and France, most notably in the range of product available.

The mortgage model is very simple and with few exceptions, on a repayment basis. Interest only may be available but it is case-by-case.

Long-term fixed rates are common with rates at some of the lowest we have ever seen. Loan-to-values are up to a maximum of 75% but 80% loan-to-value (LTV) should be reinstated in the coming months.

A buy-to-let mortgage based on potential rental income does not exist per se.

It is the borrower’s income and outgoings and age to a certain degree which determine the size of the loan available.

Banks have no issue with owners renting out property so the interest rate is the same whether this is the case or not.

There are concerns regarding a no-deal Brexit and banks are more conservative than usual as the repercussions of COVID play out.

Standard affordability criteria has not changed but there is obvious caution and certain sectors raise red flags.

For example, if a high proportion of the borrower’s income comes from bonuses or commission, many lenders have made the blanket decision to only take salary into account.

Common sense can prevail but this will usually require invention from the credit department and a specialist broker will be more likely to have the opportunity to work at this level rather than a client making a direct application.

Valuations have also been affected by lockdown so the maximum LTV a bank will consider has fallen as values may be up to 10% lower.

Surveyors are now able to visit properties once more however, and the market is expected to adjust quickly.

High-net-worth individuals often find they do not fit the rigid mould of European retail banks’ criteria so are more naturally private banking clients.

Banks in Monaco, Switzerland and Luxembourg can lend in most prime locations although they may insist on a certain ownership structure.

These banks have the expertise to understand more complex revenue and may base a lending decision on assets rather than simply income.

The type of loan a private bank offers is more usually a five-year interest-only facility (a bullet loan) and it is not a stand-alone or ‘dry’ loan as they are looking for a wider relationship with the borrower.

What this translates to is a requirement for assets to be provided, usually for a minimum of €1m to be invested with the bank, so this option is really only suitable for property values of €3m-plus.