It is no wonder that with the change of each season and the numerous sports, activities and recreational facilities that abound, many people are attracted to the mountains and dream of owning their own piece of wonderland.

But buying a property in a foreign country can be very confusing unless you know the ropes, and making mistakes can be costly.

With our help we'll guide you through the French mortgage maze.

Step 1 - How will you buy your property? - You have three options.

Buy for cash - the easiest option to take, but once you have put your capital into French property it may not be that easy to release some of that capital in the future.

Re-mortgage your main home to raise the cash - another straightforward option, but you will probably be paying a higher interest rate than if you borrowed from a French bank, and don't forget the mortgage warning … "Your home may be repossessed if you do not keep up repayments on your mortgage" You may be putting your main home at risk for the sake of your holiday home. As with buying for cash, it may not be that easy to release some of the capital in the future.

Buy your property with a mortgage from a French bank - it's not that difficult and we'll guide you step by step through the French mortgage maze.

Step 2 - Prepare yourself for the costs.

Whether you are buying for cash or with a mortgage there are some costs you are going to have to fund yourself - Reservation Deposit, Notaire/legal fees, and Immobilier/Agents fees.

The Reservation Deposit - as your agreement to the purchase. When you sign the Compromis de vente (the sales agreement contract) you will be required to pay your reservation deposit which is usually 10% of the purchase price for older properties (it could be less for new properties under construction or buildings under five years old). It is advisable to pay your deposit cheque to the notaire or agent who is representing you and not to the vendor. The deposit is held by the notaire/agent until completion.

Notaire fees - if you are buying a new build property, expect your legal fees to be about 5% of the purchase price. For older or existing properties be prepared for 8% of the purchase price. In addition to the legal fees, there will be the land/property registration fee which varies from region to region. You can choose your own notaire, or use the same notaire as the vendor - whichever you choose, the cost will be the same, but having two notaires involved may cause some delays. Notaire fees can only be included in the mortgage for French tax payers. If you pay tax in another country, you will have to fund the notaire fees yourself.

Immobilier/Agents fees - an amount of between 5% and 10% can be charged and there is no hard and fast rule on whether it is the vendor or the buyer who pays the agents fees. If you are applying for a mortgage you can include these fees in the mortgage if the agency fees are stated in the Compromis de vente.

The Mortgage Costs

Deposit - the amount you need to provide as your deposit for a mortgage depends on your nationality, the country you live in and where you pay income tax.

For residents and tax payers in non EU countries, the minimum amount of deposit is 20% of the purchase price. (80% mortgage)

For UK and EU residents and tax payers the minimum amount of deposit is 15% of the purchase price. (85% mortgage)

Up to 100% mortgages are available for tax payers in France.

Arrangement fee - the French banks charge arrangement fees. Most charge 1% of the amount of the mortgage, many with a ceiling limit of €1,500, but it is advisable to check because some do not have a ceiling limit at all, so you may end up paying 1 percent of the total mortgage.

Step 3 - Knowing your maximum price range and the mortgage repayments.

There are some strict rules which the French banks use to establish affordability, and these rules govern the maximum amount a person can spend each month on their French mortgage.

Only one third (33%) of your monthly income can be used to service any existing mortgage or rent, other loans, financial commitments, maintenance payments if applicable, and credit card repayments (if the outstanding balance is not cleared every month). What is left from your third of monthly income can be used to service a French mortgage and must also include the cost of life assurance.

No one likes disappointments, so if you are thinking about applying for a mortgage to buy your property, you should establish just what price range you should be looking at, whether you have enough cash funds for the deposit and legal fees, and that your income is sufficient to afford the monthly cost of your French mortgage.

If you need help in calculating the maximum mortgage you can afford and a guideline to the maximum purchase price, please visit www.mortgagefrance.com and complete the 'Initial Enquiry' form.

Step 4 - Finding your property.

Once you know the maximum purchase price you can afford, you can start looking for a property to buy with a certain degree of confidence.

With so much information readily available from internet websites and magazines advertising properties for sale in France, it is very easy to get an idea of what type of property is available and at what cost before you actually start your search, and there are many ways to search for properties - estate agents, property magazines and ''home hunters". In more popular or urban areas you will probably find estate agents who offer an English speaking service.

Make a list of the important elements - the purchase price, the overall size and number of rooms, is a cave (cellar) for storage important, would you prefer a property in a village or town, or are unspoilt views of the mountains an essential requirement, etc - it will keep you and your estate agent or "home hunter" on the right track to find your ideal property. The type of property and its condition is also an important consideration. There are certain types of properties that will not be acceptable for mortgage finance and the property should be classed as "habitable" meaning structurally sound and having the basic utilities of electricity, mains water and sewerage system, all conforming to the current regulations.

It will be very difficult, if not impossible, to raise mortgage finance on buildings constructed totally of wood, stone cabanons, derelict barns and properties with agricultural land. Some bank will not accept properties that have been registered for commercial use such as gîtes and chambres d'hôtes.

Buying to renovate or build a new property is possible but demands careful pre-planning. Detailed applications must be completed for the Certificat d'urbanisme (certificate of town planning/urban development) and other documents, which state what developments are allowable on the property and its land.

If you are relying on mortgage finance for improvement or renovation works, then the works will have to be completed by tradesmen who are registered in France. Registered tradesmen have the correct insurances covering their work - it is the essential guarantee for the bank or lender. Written estimates for the works have to be submitted at the same time as the mortgage application.

Step 5 - Making your offer and signing the Compromis de vente.

Having found the property you want to buy, you will have to make a formal offer to the vendor (the person selling the property).

If your offer is accepted, you will then be expected to sign a Compromis de vente (a sales agreement), and pay your reservation deposit to the notaire or the agent. Once you have signed the Compromis you have a 7 day cooling off period in which time you can change your decision about buying the property - a good time to have a structural survey carried out.

Now is the time to request mortgage quotations and decide which bank you will apply to for your mortgage finance. Please visit www.mortgagefrance.com and complete the 'Request Quotation' form.

The Compromis de vente is a legal contract, and contains details of the vendor, yourself (as the purchaser), the property, and the date you should complete the purchase by.

If you are applying for mortgage finance, there will also be mention of the date when you should have your mortgage offer letter by - it is usually 45 days - there is a clock ticking away.

Important - Protect your Reservation Deposit.
The Compromis can contain some suspensive clauses (get out clauses). If you are applying for mortgage finance, it is important to include a suspensive clause stating that you are applying for mortgage finance and that your agreement to purchase the property rests with being offered mortgage finance. If your mortgage application is declined, you will not forfeit your reservation deposit to the vendor.

Step 6 - Your mortgage application.

Under French law, all mortgages are "full status" and a lot of documentation is required to support your mortgage application.

The banks and mortgage providers are obliged to ensure that any person applying for a mortgage is financially able to meet the mortgage repayments.

Apart from a completed mortgage application form, life assurance form and a copy of the Compromis de vente that has been signed by both you and the vendor, you will need to provide photocopies of:

- Identity - birth certificate, passport, marriage certificate and divorce certificate if applicable
- If you are employed or receiving a pension - 3 months payslips, P60's or tax returns, proof of any other income 
- If you are self-employed or director of your own company - 2 years trading accounts and tax returns 
- Banks statements (3 months) showing receipt of income and payment of loans. Statement proving your fund for the deposit to your mortgage 
- Statements (1month) relating to existing mortgage(s), loans and credit cards and maintenance agreement if applicable
- If you live in rented accommodation you will be required to show your rental agreement
- For pure interest only mortgages - a statement of assets 

If you are buying a "new build" or wanting to include the costs of works /renovation in your mortgage you will need to provide further documents: 
- For renovation or improvement works - professional estimates or invoices from tradesmen registered in France together with a copy of their insurance certificate
- For property to be built - the property title or preliminary sales agreement for the land, building licence, the building contract and plans 

Life assurance is mandatory to cover all the terms of your mortgage. Most of the banks and lenders insist on their own in house policies are used and the medical underwriters may ask you to have a medical examination or tests.

When your file has been thoroughly checked and approved by an underwriter, the lender will request a valuation of the property. The valuation is not a survey. It is merely a valuation agreeing that what your are paying for the property and the amount the lender is prepared to lend is acceptable.

Should you be declined mortgage funds, either because of financial information, medical underwriting or the unsuitability of the property, the lender will advise you and issue you with a letter which you can use as your proof to have your deposit refunded to you as agreed in the suspensive clause of the Compromis de vente.

Subject to everything about your mortgage application being acceptable, a mortgage offer letter (offer preable du credit) will be issued to you.

The rules about signing and dating your mortgage offer are very strict. There is a 10 day cooling off period. This is a legal requirement and allows you sufficient time to consider the terms of your mortgage before returning the documents to the bank by post.

Some lenders will want their arrangement fee paid on acceptance of their mortgage offer and your life assurance policy will by put on risk from the date you signed the mortgage offer.

You must sign and date the offer letter after waiting 10 days but before 30 days have elapsed. If you get the date wrong, a new offer letter will have to be issued with another waiting period of 10 days.

When the lender sends you the mortgage offer they also inform your notaire of the details of the mortgage. Completion date should be concluded within 4 months of receipt of your acceptance to the mortgage offer.

Step 7 - Getting ready for the completion date.

Arrange a mutually convenient date with the Notaire and the vendor to complete the purchase of your property, and there are still a few more details to attend to.

You will need to open a French bank account if you haven't already done so, and arrange to transfer sufficient funds to cover your Notaire fees and the balance of your mortgage deposit money.

You will also need to arrange for buildings insurance, and the policy needs to be on risk on the date of completion. You will need to provide a copy of the policy document.

Instruct your Notaire to request the mortgage funds from the bank. The mortgage money should be requested a week before the day of completion.

You will be sent a draft of the Acte de vente (projet de l'acte) (final deed of sale) a few weeks before the completion date. It will contain much of the same information as in the original Compromis, but check it through carefully. It will also state the date that you may move into the property.

If your command of the French language is not good, you should ask for the notaire to arrange for a translator to be present on completion day.

If you think you may be unable to attend the meeting to sign the Acte de vente (final deed of sale) you can give a trusted person or friend a power of attorney (a mandat) which authorises them to act on your behalf if you unable to attend the actual signing.

Step 8 - Completion day.

Make sure you have identity documents with you ….. Your birth certificate and passport, together with marriage certificate and divorce decree if applicable.

Don't forget to take your cheque book in case there some additional costs to pay.

The Notaire will explain all the clauses in the Acte de vente, after which the document is signed by you (the buyer), the vendor and notaire. If both you and the vendor have different notaires, only one notaire needs to witness the signing of the Acte de vente.

Once the Acte de vente has been signed and witnessed, the notaire has to pay all the taxes, settle all the accounts of the purchase/sale and register the deeds and mortgage. A few months later you will receive a certificate informing you that the title has been registered. The original title deed is kept by the notary, although they may make authorised copies.

Congratulations - it's a wonderful moment.

Carole Bayliss
carole@mortgagefrance.com