Obtaining A Mortgage as an Expatriate in The Time of Covid-19

[Partner article]

In the midst of the health crisis, the real estate industry has shown to be robust. Despite two lockdowns in 2020, the Notaries of France’s latest Conjuncture in France shows a reduction in sales volume of just 4% over a year, with 1,024,000 transactions as of December 31, 2020. The amount of credit produced was similarly modest. With 252 billion euros in credits created last year, it was a successful year (loan renegotiations included). Rates have been low, and credit conditions have remained good. However, the funding of expatriates has grown increasingly difficult for non-residents. An update on the present situation is provided.

Obtain your home loan remotely

For numerous years, the banks’ favorable mortgage rates have allowed them to recruit new consumers. Once these consumers have joined the bank, the banker will be able to offer them additional, more profitable financial items. The establishment of a bank account is frequently the beginning point of this business connection between the borrower and the lender. As a result, opening an account is a need for receiving a loan, and it is usually done in person at a bank office.

Non-residents, on the other hand, did not have the option to stay in a health setting where the shutting of borders made transit from one nation to another difficult, if not impossible, and where fourteen days were enforced overnight. They’re on their way to setting up their accounts.

Although certain aspects of the loan file may be completed online, many banks need you to meet with clients to whom they will provide a mortgage in person in order to complete these administrative procedures. You can get around this barrier by contacting a non-resident credit broker.

Some banks may offer you a remote loan for a very modest increase in your mortgage rate, based on your country, nationality, and professional status.

Since the Covid-19, there has been some easing on this issue. Some banks have changed their operations to adapt to the health environment and allow remote account openings, which was previously inconceivable. The terms of a remote loan differ from one bank to the next. Authenticating your civility at the French Embassy in your country of residence is sometimes all that is required. These reduced remote processes, however, aren’t always viable.

Indeed, depending on the source of your file, a banking institution will not take distant funding on a consistent basis. This will not be an issue if it comes from a broker with whom he is familiar and with whom he has built a trusting connection.

Otherwise, your credit request may be turned down. As a result, it is more important than ever to contact a credit broker who is familiar with non-resident files and is regarded as an expert on the issue by banking players.

Tougher conditions of access to credit for non-residents

The health-care crisis has increased the uncertainty and dread of bank defaults on resident files, and much more so on expatriate files. Financing circumstances have tightened, particularly as a result of the High Council for Financial Stability’s recommendations, which established a debt-to-income ratio of no more than 35 percent (including borrower insurance).

Some big financial firms that funded foreign consumers prior to the pandemic are no longer doing so or have scaled back their operations. It is difficult to determine which banks accept loan applications from non-residents if you proceed without the assistance of a broker.

Non-residents’ access to credit has always been more difficult than residents’ access to credit in the past, for a variety of reasons:

• Regulatory constraints: International laws are progressively regulating the financial environment in order to prevent the funding of fraudulent activities and money laundering.

• File study and preparation: due to your professional and fiscal environment, the study of your file and supporting documents (pay stubs, employment contracts, etc.) in a foreign language, often in a foreign language, necessitates resources and analytical capabilities that not every banker possesses.

As a result, the terms of credit for expatriates have never been the same as those for locals. Banks frequently ask expats for bank equivalents (pledging an amount of money, for example) and provide them rates that are 0.3 to 0.5 points more than those offered to locals to compensate for the risk of financing this customer. However, considering current rates’ historically low levels, this rise is insignificant.

Despite this, France continues to be one of the countries with the lowest fixed rates and the ability to borrow for considerably longer periods of time than other countries. Non-resident investors can also take advantage of far more liberal intervention quotas than they can elsewhere. While France may occasionally finance up to 90% of the value of a house, Spain and Italy only go up to 70%.

As an expatriate, the contribution is also a requirement for getting a house loan. It must be between 20% and 30% of the whole cost (notary, bank, guarantee, or brokerage), and its source must be obvious, as the bank may ask you to defend where it came from.

Despite these granting requirements, and this is especially true at a time of health crisis, a feasibility study conducted prior to the search for your home with a non-resident broker will help you to determine what are the roadblocks to receiving a loan. On the guidance of your credit broker, you will be able to adapt your file to bank standards. If there are no impediments, you can run a loan simulation to get an estimate of the credit rate from your broker.

The more you plan ahead for your financing proposal, the more likely your project will be realized.

The special situation of mortgage loans to non-UK residents

The number of requests from French individuals living overseas who want to return to France to be closer to their family and avoid having to go through quarantines has increased dramatically. This is especially true for French individuals who live in the United Kingdom. Several of them return to France with their overseas work contracts intact. They are seeking for primary residences in France, and many of them are purchasing homes in sunny areas like the PACA.

Due to the implementation of Brexit, these non-UK residents have recently had increased difficulty receiving funding. Banking institutions were more concerned about a probable economic downturn on the other side of the Channel. French banks, on the other hand, do not turn away this large customer with, in many cases, better earnings than in France.

If you are a non-British resident who want to return to France, ensure that your finance is in order before signing any sales deal.