Our French mortgage consumer guide is here to help you find your way through the French mortgage maze.
French mortgage broking (Prêt Immobilier Courtier) is still under regulated, nowhere more so than with mortgages for non-French borrowers.
If you are incautious, or just plain unlucky, you can encounter a selection of financial “Old Spanish Practices“. Such behaviour would have seemed quite normal to a 1920’s New York financier from what Warren Buffet termed “the syndicated end” or typical of the mis-selling practices that we saw in the run-up to the 2008 banking collapse. Our French mortgage consumer guide will help you avoid getting caught by brokers charging unwarranted fees and commissions.
Be particularly wary of French mortgage brokers who request an up-front non-refundable Introductory Fee for “studying your dossier”. Our French mortgage consumer guide explains why the request for a non-refundable fee should put you on your guard.
This French mortgage consumer guide is intended to arm you with a set of key questions to ask. If you’re happy with the answers then you and your finances should be safe from the wolves.
If in doubt read or page How to Choose a French Mortgage Broker.
5 Key Issues
Our French mortgage consumer guide focusses on the 5 key issues that seem to recur as causes of difficulty between the client, the broker and the Estate Agent:
1. The charges for French mortgage broking.
In the French mortgage market you will find three types of broker. Brokers can be: bank commission based, client fee based or those that take a commission from the bank and charge a fee to the client.
A commission based broker earns his or her living by giving the client best advice and being paid a commission by the lender whose product is chosen. This commission is usually in the order of 1% and capped at around € 1,000: A fair reward for good advice.
A fee based broker charges the client a fixed fee, usually around € 1,000, and remits any commission received from the lender directly to the client. This is a very rare arrangement in France.
The commission + fee brokers are an interesting breed. They, like the commission broker, will receive the standard 1%-1.5% commission from the lender. They will also demand that you pay an up-front dossier fee of typically £500. Most add a success fee which can be as much as 3% of the sum to be borrowed. In total they will expect to pocket up to 4% of the mortgage value in commission and fees. Unsurprisingly, they may be remarkably resistant to answering your questions regarding how much their services will cost you and why their service costs more than a commission broker. This is a very expensive way to source a mortgage but surprisingly common in France.
By all means choose the broker you have most confidence in, but do remember to ask how much their service is going to cost you. Assure yourself that the service is truly worth the money!
Best French Mortgage always works on the commission based model with no charges to the client.
2. The competence of the French mortgage broker.
Because the French mortgage broking market for non-residents is unregulated you can’t expect a French mortgage broker to hold an equivalent qualification to CeMAP (Certificate in Mortgage Advice and Practice) that you will find elsewhere.
Beware of the French mortgage brokers that claim to be regulated by virtue of regulation for other products such as UK mortgages. Such regulation does not apply to the service they are offering you.
However you should expect your broker to have a wealth of financial services experience and to be thoroughly familiar with the products he or she is offering.
It is always prudent to get a French mortgage broker to tell you about their career history. With a bit of history you should be able to distinguish between a financial services professional and a call centre commission only salesman.
Don’t be thrown off the scent by claims that the company has been around a long time. Some of the biggest and oldest companies now use low quality staff in their call centres.
If you’re not personally inspired by the broker’s knowledge and grasp of the market maybe you should look elsewhere.
3. The time taken to negotiate the mortgage offer.
One of the major causes of dissatisfaction with French mortgage brokers are delays, some of which can be very expensive and serious.
Because the French financial services sector has not yet been liberalised you should not expect things to run as fast as in other economies: There are too many pieces of paper to photocopy!
A good broker should be able to get you an offer in principle in around 2 working days from the date at which the lender has a complete dossier.
Assuming all your documents are in order and that you have no health issues that would delay your mortgage insurance you should have your mortgage funds available in time for the completion (acte) of the property transaction.
If you have any health issues which cause the mortgage insurer to raise supplementary questions your broker may have to work hard to keep on schedule but it is normally always possible.
A bad broker can take months to process a mortgage application, often because of poor training and confusion across the interface between their front and back office.
We know of cases where the broker was so slow in responding to a lender’s firm 30 day offer that their client had the rate of interest increased twice by the lender as a result of European Central Bank (ECB) interest rate moves.
We also know of cases where clients have lost their purchase property because the broker failed to move fast enough to secure a mortgage in the 3 months between the seller accepting a firm offer (compromis de vente) and the notaire being ready to complete the sale (acte).
It’s clearly not reasonable to hold your broker accountable for delays beyond his or her control but the broker should be prepared to put their customer charter in writing: Best French Mortgage Customer Charter.
4. The broker’s terms of engagement.
A foreign property transaction is always stressful no matter how smoothly it runs.
A great aid to countering the stress and uncertainty inherent in this type of transaction is for there to be a clear, simple and unequivocal understanding between the client and the broker as to where the broker’s responsibilities begin and end.
A good broker will ensure that their client is absolutely clear on the terms of the engagement. Then the client has reasonable and accurate expectations set from the outset.
If your proposed French mortgage broker does not volunteer written confirmation of their terms of engagement, ask for them. Then if you are not happy with the terms you still have time to reconsider your choice of broker.
Despite, or in the absence of, clearly set and agreed terms of engagement there are inevitably times when the parties differ on the interpretation or just fail to communicate effectively. If you should find yourself in this position we can help by intervening and arbitrating as necessary.
5. The cost of an Estate Agent’s introduction to a French Euro Mortgage.
A good estate agent is an invaluable aid to the smooth running of your French property purchase. In France the estate agency profession is well-regulated and well organised. Accordingly the vast majority of agents are competent, dedicated and professional.
In any profession, no matter how well-regulated, there are always a few exceptions. The UK BBC TV documentary on the national estate agency chain Foxtons illustrated some practices. Click to read the BBC’s summary of the Foxtons Scandal.
In France, it is not uncommon for an estate agent to offer to source a French mortgage by introducing you to a lender or broker. Often the suggestion is both genuine and well-meant. However in a small section of the industry there is a practice of paying a “ristourne” (explained in our glossary).
By contacting a lender or broker and sharing your details, the estate agent may be netting himself a “ristourne”. These can exceed €1,500. This then gets added back to the overall cost of your mortgage as a “dossier fee” or a marginally higher interest rate.
If your estate agent offers to help, it might be worth asking some probing questions. You need to check that you’re getting value for money and that the agent is helping you not just himself. Read more>
If you’re not happy with the answers to your direct questions , or perhaps the replies are evasive, you probably won’t be happy with the service!