At the start of your property search in France (and before getting too excited about what you can get for your money there!) you will need to get your head down and think carefully about what you can afford and how you are going to finance your purchase.  As a brief guide, here are your main options:

a. Pay cash

b. Get a Sterling based mortgage

c. Get a French mortgage

UK and French mortgages are similar. Lenders in both countries use property as security for releasing mortgage funds and have set criteria regarding the necessary requirements for obtaining a mortgage. The mortgage interest rates are set by the lenders, which are influenced by either the Bank of England base rate for UK lenders or the Euribor (European Inter Bank Offer Rate) for French lenders. If you are buying a second home in France, there are three ways to raise the mortgage: against an existing UK property, providing there is sufficient equity; against the French property; or a mixture of both. You can repay your mortgage either on a repayment basis or interest only or you may be offered a combination of both.

It’s important to know that French mortgage lending criteria are not based on the UK system however.  It is worked out on the basis that the total mortgage payment should not exceed a third of the purchaser’s gross monthly income.  Types of mortgage available from French lenders are similar to those offered by UK banks and a variety of interest rates are available.

Although mortgage lending has become much stricter in the current economic climate, it is still possible to raise capital against your UK property if you have sufficient equity in it and you can do this either by taking further borrowing on your current mortgage or by remortgaging with another lender. Remember this will mean your current home will act as security against your French property. Raising a mortgage against a French property however will allow you to purchase the property without putting your UK home at risk.  There is of course the risk of currency fluctuations but using the services of Smart Currency Exchange will protect you as far as possible from adverse risk in this regard. Also interest rates may well be lower and there will be tax advantages if you decide to let out your French property at any time. To get in contact with Smart go to:  http://www.smartcurrencyexchange.com/Currency_quote.aspx

You may also be able to raise money against both UK and French properties if you do not have a large deposit in savings.  Basically the deposit and costs are raised from the UK property and the difference is raised against the French property.  Bear in mind that with French mortgages, variable rate loans tend to have no early redemption penalties, whilst fixed rate loans tend to charge an early redemption penalty.

The best option really does depend on your own personal situation and on your objectives and we strongly advise taking advice from an independent financial advisor to find out what is best for you. Remember that we can help put you in touch with our recommended professionals in this area.  Don’t be disheartened if you at first you cannot find the lending you require.  A good friend of mine was turned down by 3 lenders in the UK before finding a mortgage broker who came up with an excellent mortgage at low interest.  It can be done and once you know how you are going to finance your property in France, the fun can begin!