French Mortgage - Pay Less

When getting a mortgage, everyone wants the lowest interest rate possible. However, when buying a property in France, due to the complications of language and of working in a foreign country, this search is often cut short. This is a huge mistake, as the amount that one can save over the lifetime of a mortgage by obtaining a slightly lower rate is enormous. If fact (see example below), choosing the right mortgage can save one-third of the price of the house.

• Example 1 (120 000 euros mortgage, monthly payment of 1000, 7% interest). This will take 17 years and 3 months to repay, which is 207 months or about 207 000 euros total.

• Example 2 (120 000 euros mortgage, monthly payment of 1000, 5% interest). This will take 13 years and 11 months to repay, which is 167 months or about 167 000 euros total.

• Thus, a 2% reduction in interest rate saves about 40 000 euros, which in this case is a third of the original price of the house.

Of course, this is just a rough example. Mandatory insurance and other costs would need to be considered. However, they illustrate the point that a small reduction in the mortgage interest (2%) means a huge saving relative to the price of the house (e.g. 33%).

There are a number of ways to get a lower interest rate. One of the most simple is to get a loan in euros rather than in UK pounds, the reason for this is that the euro mortgage rate has traditionally been much lower than the UK mortgage rate.

Getting a euro mortgage is now very simple as there are a number of UK banks that are now operating in France and offering mortgages in euros in France. Although one can get a euro mortgage from a French bank, there are several advantages of getting it from an English bank:

• English language. Being a British bank, they of course speak English. So you can ask questions in English, do the application in English, discuss any problems in English and so on. Unless you are fluent in French, this is a big advantage over the typical French bank.

• Understanding. The French mortgage, banking and housing markets are somewhat different from the British. The British banks which have become established in France can tell you about the differences and explain them to you.

• Convenience. Many people who buy property in France find that it is convenient to keep a British bank account. This is useful if you have British income (e.g. investment or retirement) or want to be able to write cheques for the UK. In many cases, given that you may already have a British bank account and income, it is convenient and cost effective to have your mortgage with a British bank.

Of the various UK banks offering euro-mortgages in France, Barclays Bank is the most established. They provide a free information pack which includes:

• Guide to buying property in France

• Guide to the French mortgage market

• French mortgage application