Obtaining a mortgage as an expatriate in the Covid-19 era

The property sector has proven resilient during the health crisis. Despite two lockdowns in 2020, the latest Economic Note from the French Notaries reports a sales volume decline of just 4% year-on-year, with 1,024,000 transactions as of 31 December 2020. Mortgage lending also performed well, with €252 billion in credits produced for the year (including mortgage renegotiations). Rates remained low and credit access conditions were favourable. However, for non-residents, financing for expatriates has become more complex. Here is an update on the current situation.

Obtaining your mortgage remotely

Attractive mortgage rates have enabled banks to acquire new customers for several years. Once these customers have joined the bank, the banker can offer them other financial products that are more profitable for the bank. More often than not, the starting point for this commercial relationship between the borrower and the banker is the opening of a bank account. This account opening is therefore a necessary condition for obtaining a credit facility and it is usually carried out in person at a bank branch.

But in a health context where border closures have made travel from one country to another difficult or even impossible, and where quarantines were imposed from one day to the next, non-residents have not been able to travel to open their accounts.

Although part of the mortgage application can be completed remotely, many banks require meeting the clients to whom they will be granting a mortgage in order to carry out these administrative procedures face-to-face. By contacting a mortgage broker for non-residents, you can work around this issue. Indeed, depending on your country, nationality and professional situation, some banks may grant you a remote mortgage with a very small increase in your mortgage rate.

There has been some easing on this point since Covid-19. Some banks for which this was unthinkable before have now reviewed their processes to adapt to the health context and enable remote account opening. The terms for a remote mortgage are not the same from one bank to another. This procedure sometimes simply involves verifying your identity at the French Embassy in your country of residence. However, these simplified remote procedures are not always possible. Indeed, a bank will not systematically accept remote financing depending on the origin of your application. If it comes from a broker with whom it regularly works and a relationship of trust has been established with the latter, then there will be no problem. Otherwise, your application is likely to face rejection. It is therefore more important than ever to contact a mortgage broker who is accustomed to non-resident cases and recognised as an expert on the subject by banking players.

Tougher credit access conditions for non-residents

The health crisis has heightened uncertainty and banks’ fear of payment defaults on resident files and even more so on those of expatriates. Financing conditions have tightened, notably with the recommendations of the High Council for Financial Stability, which sets a debt-to-income ratio not to exceed 35% (including borrower insurance). Some major banking groups that financed international clients before the pandemic no longer do so or have slowed their activity. If you proceed without the help of a broker, it is therefore difficult to know which banks accept non-resident mortgage applications.

Under normal circumstances, accessing credit for non-residents has always been more complex than for residents, for multiple reasons:

• Regulatory constraints: the banking environment is increasingly regulated by international laws to control the financing of fraudulent operations and money laundering.
• File study and assembly: due to your professional and tax environment, the study of your file and supporting documents (pay slips, employment contracts…), often in a foreign language, requires resources and analytical capabilities that not all bankers necessarily possess.

This is why credit access conditions for expatriates have never been the same as for residents. To compensate for the risk taken in financing this clientele, banks often require banking collateral from expatriates (pledge of a savings amount, for example) and offer rates 0.3 to 0.5 points higher than those for residents. However, given the historically low current rates, this markup is negligible. Nevertheless, France remains one of the countries offering the lowest fixed rates and where it is possible to borrow over much longer terms than in other countries. Lending limits are also far more generous abroad for non-resident investors. While France can sometimes finance up to 90% of the property value, Spain and Italy do not go beyond 70%.

A deposit is also an essential condition for obtaining your mortgage as an expatriate. It must be 20% to 30% including all fees (notary, bank, guarantee or brokerage) and its origin must be very clear as the bank may ask you to justify where it comes from. Despite these granting conditions to respect, once again, and this is even more true during a health crisis, a feasibility study carried out before your property search with a non-resident broker will enable you to know what the blocking points are for obtaining a mortgage. You can then tailor your file to the banks’ requirements on the advice of your mortgage broker. If there are no obstacles, you can proceed with a mortgage simulation in which your broker will give you an estimate of the mortgage rate. The earlier you submit your financing application, the more likely your project is to succeed.

The particular situation of mortgages for British non-residents

Requests from French people living abroad who wish to return to France to be closer to their families, and no longer be constrained in their movements by quarantines, have skyrocketed. This is notably the case for French people living in the United Kingdom. A number of them are returning to France while keeping their foreign employment contracts. They are looking for primary residences in France and are particularly numerous in acquiring properties in sunny regions such as the PACA region.

These British non-residents have recently encountered greater difficulties with their financing due to the entry into force of Brexit. Banking institutions anticipated a possible economic slowdown across the Channel and have been more cautious towards them. However, French banks are not turning away from this valuable clientele whose income is often higher than in France. If you are a British non-resident and wish to return to France, be sure to validate your financing before signing any sales agreement to give yourself every chance of success!