Before you start looking for your French dream home, you need to consider how you are going to fund the purchase. There are a number of different options:

1. via a mortgage from a mortgage lender in France
2. via a mortgage from a UK mortgage lender
3. by re-mortgaging your existing property (assuming you have equity in your existing property)
4. via a portion of your savings

Go-to-france.co.uk does not offer financial advice, and we suggest that you seek professional independent financial advice in order to choose the best method to fund your French property purchase. Below is a summary of the different methods of funding, their potential advantages and points to note.

1. French mortgage

Some people choose to take out a mortgage with a French mortgage provider. Typically, interest rates for borrowing in Europe are slightly lower than in the UK. However, this does not necessarily mean that someone in the UK is better off taking out a French mortgage, as the Euro may strengthen against the UK Pound with time.

When considering whether or not to take out a French mortgage, you should also take into account the Pound/Euro exchange rate, and how you intend to cover the mortgage repayments.

If you take out a French mortgage (repaid in Euros) and you intend to pay off the French mortgage by exchanging UK Pounds, then you need to be aware of the effect of a weakening of the Pound in relation to the Euro: ie your mortgage payments would effectively increase.

If however, you take out a French mortgage (repaid in Euros) and you intend to cover the French mortgage payments from a rental income paid in Euros by your tenant, then a potential exchange rate fluctuation will make no difference to your French mortgage repayments. (When calculating whether the rental income will cover the European mortgage payments, you should typically allow for the property being rented for 10 months of the year.)

If you rent out the property, and the rent covering the French mortgage is paid in Euros, then the French mortgage repayments will not be affected by exchange rate fluctuations. However, if you intend to cover the French mortgage payments from a UK income, the French mortgage repayments will be affected by exchange rate fluctuations.

2. Mortgage from the UK

Some people choose to raise a UK mortgage to fund their French property purchase.

When considering whether or not to take out a UK mortgage, you should take into account the exchange rate between the pound and the Euro, and decide how you intend to cover the mortgage repayments.

For example, a mortgage in the UK may have a higher interest rate than a French mortgage, but could be a more cautious approach if you intend to repay the mortgage by exchanging UK Pounds, because the repayments would not be subject to exchange rate fluctuations.

If however, you intend to rent out the French property to a French resident, your rental income would be received in Euros, therefore the repayments on a UK mortgage would be subject to exchange rate fluctuations.

If the rental income from your French property is received in Euros, then your UK mortgage repayments will be subject to exchange rate fluctuations: if you intend to cover the mortgage payments from an income in the UK, then the mortgage repayments will not be subject to exchange rate fluctuations.

3. Re-mortgaging your existing property

People often prefer to re-mortgage their main residence to fund the purchase a French property because there is typically less paperwork involved with their existing mortgage lender. If you have sufficient equity in your UK property, and providing you are in a position to fund additional repayments, you can usually extend your mortgage to raise additional funds, secured against your main residence.

When considering whether or not to re-mortgage your main residence, you should also consider the exchange rate between the UK Pound and the Euro, and decide how you would cover the mortgage repayments.

For example, UK re-mortgage may have a higher interest rate than a French mortgage, but could be a more cautious approach if you intend to repay the mortgage by exchanging UK Pounds, because the repayments are not subject to exchange rate fluctuations.

If the rental income from your French property is received in Euros, then your UK mortgage repayments will be subject to exchange rate fluctuations: if you intend to cover the mortgage payments from an income in the UK, then the mortgage repayments will not be subject to exchange rate fluctuations.

Some people re-mortgage their main residence to fund the purchase of a French property and rent out the property to a French resident, receiving payment in Euros. They take the view that their re-mortgage is not dependent on the exchange rate as their higher salary will cover the extra re-mortgage repayments. This only works if the individual is disciplined enough to ensure that their increased salary is used specifically to cover the re-mortgage payments. Another consideration is that a pay cut or redundancy may mean that they would not be able to maintain the mortgage repayments out of their reduced income, and would have to rely on the rental income, which would be subject to exchange rate fluctuations.

4. Using your savings

Some people, with considerable funds at their disposal, choose to pay outright for a French property, but many people take the view that even if they have sufficient funds, it is still preferable to borrow money, as it allows them to maximise any potential profit on the resale of the property in the future. For example; if somebody has £100,000 savings, they may put down £20,000 deposit and raise £80,000 on mortgage. The £80,000 remaining in the bank would be earning interest, and the mortgage repayments would be met by the rental income. If their property is sold at some future date for say, £110,000 they would make 50% profit ie £10,000 (as they only put down £20,000), as opposed to just 10% profit if they had paid for the property outright.

While the information given in this factsheet is accurate to the best of our knowledge and belief, no liability is accepted by Go-to-France.co.uk for any errors it may contain. You are advised to check all information and take professional advice before entering into any agreement.

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