Mortgage Q&A: The groundwork

Q: I am currently looking for a property to buy in France, but I am nervous about signing a contract for a purchase that I won't be able to finance. Is there any way of getting assurance on a mortgage before signing the sales agreement? K.S.

Having doubts over managing to secure a mortgage is a common and understandable concern for many property buyers.

This apprehension is only increased when you are intending purchasing in a foreign country, whose property and mortgage markets you may not be familiar with.

Fortunately, French lenders provide a solution to this problem, which is designed to give buyers more peace of mind when signing the sales contract on their dream overseas property.

The way that the French banks are able to do this is by welcoming mortgage applicants who have not yet finalised a property to buy but are looking to get their finances in order.

These applicants are invited to submit a file of all the regular supporting documentation required for a normal application – identity documents, proof of income, etc – but also leaving the details of the property blank.

This puts the lender’s underwriters in a position to assess the applicant’s file or dossier and provide a provisional Agreement in Principle (AIP) accord de principe.
By doing so, you can gain confidence in your eligibility to raise finance and that also allows you to focus your property search to those homes which fall within the relevant price bracket.

Furthermore, an AIP is a very powerful thing to have when it comes to negotiating a purchase price. If you can produce confirmation from a reputable lender that you have already arranged a credit facility, agents and vendors are likely to take your offer more seriously and feel more comfortable with the idea of selling to you.

Ultimately, this could prove the difference between having an approach refused and being able to sign a sales agreement with total confidence that you are not overstretching your finances.

Although French banks are happy to study applications before a contract is signed, many lenders will only provide official AIP letters to applicants who are working with their most trusted brokers and intermediaries.

Jo Cowling, of mortgage brokers International Private Finance (www.international privatefinance.com) answers your mortgage questions. Send queries to mortgage@connexionfrance.com
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