The Covid-19 epidemic has brought some tough times for everyone.
Many of us are facing an immediate drop in income and some of us may be facing unemployment or reduced activity when the Corona virus pandemic passes and the economy begins to function again.
One worry is that many French second-home owners rent their properties and often use part of the rental income to cover their mortgage. Currently it doesn’t look as if there will be many summer rentals this year and the leaseback management companies have yet to declare the financial consequences for property owners of the ski season ending early and abruptly.
If you have a French mortgage you are probably wondering how you can continue to keep paying it, or whether there is another way. The good news is that most French mortgage contracts include the possibility to reduce payments for a period or to even take a mortgage payment holiday.
Will my French mortgage let me have a mortgage holiday?
In fact it’s easier to identify borrowers who will be refused a French mortgage holiday. For example, the loan must have started more than 12 months ago and you must have made the first 12 monthly mortgage instalments on schedule. Your payments must be up-to-date: borrowers in arrears will not be granted a French mortgage holiday. And you can’t have one mortgage holiday immediately the last one finishes as there can only be one mortgage holiday per year.
Where can I find out if I’m eligible for a French mortgage holiday?
You will have to unearth your initial French mortgage offer. The French mortgage offer contains all the Terms and Conditions of your French mortgage. Usually there are separate sections for CONDITIONS GENERALES which are the bank’s policies and CONDITIONS PARTICULIERES which are specific to your individual French mortgage. For example the CONDITIONS PARTICULIERES may explain how many mortgage holidays you can have throughout the mortgage and the CONDITIONS GENERALES explains how to apply for the holiday.
What happens to my direct debit?
Even French mortgage holidays will not allow you to stop paying life insurance, these payments must continue. Some mortgage holidays do not allow you to suspend the interest which is due on the mortgage, only the capital repayment element. You may find that your direct debit is lower but not zero.
What happens if I simply stop paying my French mortgage?
Everyone accepts that if you don’t repay a French mortgage the bank can repossess the property. “Your home is at risk ……” etc, the phrase we have all seen, but never considered that it would ever apply to us. Losing your French home would not just be an emotional wrench, but can also be very expensive as the bank’s recovery costs, including high French legal fees, are added to the mortgage sum due. The French bank won’t hold out for the best price on the sale or take account of your renovations and improvements: they will merely seek to recover their debt.
It’s worth mentioning French negative equity here. If you decide to sell the property before the bank forecloses the Notaire cannot, by law, process the sale for less than all outstanding debts such as the mortgage, the utilities, the local taxes. In a falling property market some properties cannot be sold without declaring the owner bankrupt.
Stopping mortgage payments without the bank’s prior permission will lead to penalties throughout France, the consequences of which are worse than just losing the property. In France all late bill payers are added to the Fichier National des incidents de remboursement des crédits aux particuliers (FICP), making you what is termed “Banque de France”. Every French business entering into a financial relationship with an individual will first consult the FICP. (This provision also applies to non-payment of other bills such as electricity, water and Taxes Foncieres.) Once an individual is “Banque de France” they cannot get credit for anything in France, including another mortgage, a bank loan, a credit card, a phone contract and may even be prohibited from holding a French bank account.
How does the bank collect the missing repayments following a mortgage holiday?
French mortgage holidays are short, no more than 6 months. After the holiday the French bank will calculate the missing capital and the unpaid interest, but the interest can be capitalised.
Depending on the lender, the resumed repayments may be set at a higher amount for the remainder of the agreed term or the term may be extended.
How should I decide whether to ask for a French mortgage holiday?
First, decide whether you really need a holiday. Many French mortgages allow you to flex the payment amount, so you may not need to use up one of your mortgage holidays immediately. If you still have income you may prefer simply to reduce the current payment within the limits specified in your mortgage contract.
You will remember that during the French mortgage application process the French bank always asked about residual, Rainy Day, savings. Now might be the time you need to use some of them. Interest rates are historically low so you’re probably already repaying the French mortgage faster than when you started. Mortgage holidays are an option, not compulsory.
Mortgage holidays require bank approval. Non-performing loans do not generate income for the bank so the bank will need to be convinced by a well-presented application that they should agree to your request, particularly if the French property is not your principal residence.
Second, find and read your initial mortgage offer. At the time you were probably more concerned to get through the 10-day cooling off period rather than to study 80 pages of French detail. Now you may need to understand everything the French bank had carefully laid out. Also, make sure you have the latest mortgage statement and that the bank is aware of your current personal circumstances, for example if you have moved house, changed your e-mail, been widowed or separated.
Covid-19 -Best French Mortgage are here to help.
At Best French Mortgage we’re here to help, so it doesn’t matter who arranged the mortgage initially: a broker, an estate agent or whether you approached the lender directly.
We are already in touch with the banks, so to help you, all we will need to know are the mortgage details and why you need a mortgage holiday.
A French mortgage holiday may be just what you need to prevent your French dream turning into a French nightmare so Contact Us Right Now for some professional help before it’s too late .