Reflections on getting a mortgage in France
January 13th, 2010 | Published in Comment, Features, Life & Culture
'Crise immobilière'. Photo: _02_
Grenoble Life editor James Dalrymple shares his personal experience as a first-time home buyer in the Captial of the Alps – and is happy to report that it’s not all bad news!
Now that I am starting to see a flicker of light at the end of the rather dank and cavernous tunnel called home-buying, I feel compelled to share some of my observations. Whereas I can confirm its status as one of life’s more arduous experiences, it has not been worse than I had anticipated, for no-one ever said it would be a breezy walk in the park with a big piece of cake.
Before deciding to buy a flat I’d had several friends trying to re-educate me on the value of renting for life; unconvinced by the merits of life-long debt and the likelihood of paying the price of one’s property several times over in interest. “Be cash rich and asset poor,” these savvy characters insisted, pointing to the lower home maintenance costs and fewer taxes for locataires (for example the annual taxe foncière is only levied upon owners, not tenants).
One fact of life as propriétaire in a co-property is that one can face hefty fees if the exterior of the entire building has to be repainted, or if there is a shared heating system to be replaced: neither a tenant’s problem. Owning one’s own home, though, is pretty much brainwashed into Brits as a rite of passage, even if we have to accept that we can’t necessarily afford what our incredibly lucky baby-boomer parents had. When my career is over, however, I would like to have paid for my home, and be able to subsist rent-free on whatever meagre pension I have accrued.
To quote a Grenoble Life contributor, Felicity Lodge – whose article Arranging your finances in France is well worth a read - ”buying a property in France is highly regulated”. I concur, and there are some major pros and cons to the regulation. She goes on to say, “the amount you can borrow is controlled so loan payments and any other regular obligations cannot be more than 33% of your monthly income (net of social charges)”. This may seem strict but the French are a prudent people, and the banking culture befits a country less footloose with borrowing. The kinds of problems that led to the sub-prime crisis in the US couldn’t have originated in France. Likewise, credit is not as easily available as in the UK, and I have the impression that people are more sensible with their disposables.
The upside of a regulated home buying process is that there is less risk. Once you have agreed a price with a seller, you can engage the process via a specialised lawyer (a notaire) who manages the sale from then on. Once you have signed the pre-contract compromis de vente, there is little chance of being gazumped given that the seller would subject themselves to a significant fine if they chose to break it.
In Britain you stand the risk of having incurred legal and surveying costs only for the seller to pull out in the 11th hour to accept a better offer from a rival buyer. That this gazumping is allowed to stand in the UK is obscene, one feature of the county’s rather lunatic housing market. In France, however, the absence of risk comes at a cost: namely 6-8% of the sale price. This covers all legal, tax and surveying concerns, but certainly amounts to much more than the sum of those individual costs in Britain: and most of it goes directly to the government. This fact lends credence to the idea that renting is better value than buying – it is an enormous financial consideration to face on top of one’s downpayment, and a serious obstacle to owning a number of different properties in one’s life.
In the event our notaire was good value for money, something of a showman in fact. Having let his juniors take care of the preliminaries we were marched into his office for the final exchange of contracts. With well-honed comic timing and vigorous gesticulating, his beautifully flowing oration was magnificent to behold: condensing a summary of France’s unsurprisingly substantatial housing law into an hour-long address. Furthermore there were some last minute complications with the bank but he - a force of nature not to be meddled with - was by then sufficiently committed to our purchase to bang some heads together at the bank to keep the ball rolling.
Personally I could see no advantage in approaching an agence immobilière (estate agency). Assuming that you have an idea in which quartier you would like to buy, and the appropriate value for a property in that area, you can search for private sellers online on sites such as Paruvendu and Leboncoin. We negotiated directly with the seller, bypassing the middle man. Given that the notaire conducts a thorough survey of the property and that you can withdraw without charge at the signing of the compromis de vente, then the need to work with an agent did not make itself apparent to me.
If, like me, you are a first time buyer in France, you could be entitled to a zero per cent loan of up to around 30,000 euro. Such loans, and their duration, are defined by your means. We qualified for approximately half of the thirty, and it has to be repaid within the first six years of our mortgage. However, we found ourselves in the slightly sticky position of having (for reasons too boring to explain here) to apply for this from a different bank to that from which we had agreed our principal mortgage. Of course, the bank from which we were requesting the zero per cent loan held us captive while they tried in vain to beat the mortgage we had secured from our other bank, and upon realising they couldn’t do it, saddled us with a rather inept trainee to administrate the loan.
Trying to get a bank to hurry up (necessary when deadlines have been imposed by the notaire) when there is essentially no profit in it for them is quite futile – more so when you’re main contact hasn’t a clue what he is doing. Amusingly, said bank tried to fob us off by saying something along the lines of “there’s so much admin involved in this loan that it’s hardly worth it”. That’s right, admin not worth potentially thousands of euros – I don’t think so! However, they almost had a point, the sheer quantity of justificatifs required would have impressed even the most hardened of fonctionnaires. Just the photocopying and stapling drew a Herculean effort from our trainee bank manager, who made a clerical task seem like Fort Boyard.
Anyway, now that the boxes that once dominated the flat start to empty and disappear, and life seems worth living again, we can look forward to the much fabled tax credit for first time buyers: apparently the interest we pay on our mortgage is deductible from our annual income tax bill for the first five years of repayment. Rumour has it that if the interest is greater than your obligations, the French government start mailing you cheques. I’ll let you know next September. These advantages put a little shine to the lie that renting is throwing you’re hard-earneds away to a landlord whereas paying a mortgage is like putting money in your own piggy bank. A mortgage is still (in my case) a 25-year burden, but on balance I think it’s worth it.
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