French Refinance Mortgages are the right choice if you have an expensive existing mortgage or your mortgage needs have changed.
In summary, you can switch to a lower mortgage rate repayable over a 50% longer term and include all the switching costs in the new mortgage.
Except in a few very limited circumstances, you cannot use this type of French mortgage to increase the size of your mortgage.
Importantly, you cannot use French refinance mortgages to release equity from a previously mortgaged property. So, if you have paid off your mortgage, you should choose a French Equity Release Mortgage.
Refinancing is very simple to do. The refinancing process is managed by your notaire who will ensure the new mortgage is registered and the old mortgage paid down.
Why Consider French Refinance Mortgages
The French banks define a refinance mortgage, a rachat de credit, as the buying out of an existing mortgage from another French bank.
There are three common circumstances in which you can consider French refinance mortgages.
Firstly, you can use French refinance mortgages to switch to a lower mortgage interest rate. Because Euro interest rates have fallen considerably since 2008, we may be able to help you to substantially reduce your monthly mortgage payments. Though it is technically possible to obtain an interest only refinance mortgage, in practice it is almost impossible.
Secondly, you can use French refinance mortgages to extend the term of your French mortgage. The number of years extension you can get will depend on your age and the lender’s refinance rules. However, we can normally arrange refinance at 150% of the mortgage term remaining on your mortgage. For example, if you have 16 years remaining you will be able to refinance to 24 years.
Finally, you can switch the type of mortgage from an interest only mortgage to a repayment mortgage. Notably, switching from an interest only mortgage to a repayment mortgage is usually very easy.
In these cases, you can increase the new mortgage to pay any notaires fees due.
You can also add any repayment penalties to be paid to the old bank to your new mortgage.
Firstly, it is not possible to use refinance to increase the size of your French mortgage.
Secondly, it is not normally possible to switch from a repayment mortgage to an interest only mortgage. This is because French banks view Interest Only Mortgages as tax planning products.
Thirdly, because all French lenders set a minimum amount for refinancing small outstanding mortgage balances cannot be refinanced. Though the minimum level varies between lenders, it is typically above €100,000.
Finally, refinance of an interest only mortgage is not possible if the reason for refinancing is to reduce the monthly interest payments.
Refinancing to Fund Renovations
If you need to increase the size of your mortgage to fund a renovation or building works, we can offer you a two-part solution.
Firstly, you would need to refinance your old mortgage with the new bank. This is necessary because all French mortgage lenders require a first charge on the property. With a first charge the lender has priority over all other liens or claims on a property in the event of default.
Secondly you would take an additional French Renovation Mortgage from the same lender to cover the cost of the works.