It is possible to obtain an interest only French mortgage from a French bank by placing around 30 percent of the purchase price of the property into a French bank-approved investment bond.

The French bank will lend you one hundred percent of the purchase price on the understanding that the 30 percent you invest with the bank is held as collateral for the loan.

You will pay interest only at a rate of between 3.5 and 4.5 percent per year.

The money invested can be held in a variety of investment funds including guaranteed return funds. Typically the loan period is between 15 and 20 years; the idea being that the funds will grow over the period to pay off the loan at the end of the loan term. There is an entry fee of around three percent for the funds invested.

Any shortfall in the growth of the fund must be made up by yourself at the end of the loan period. Make sure you fully understand the way the loan works before making any investment.

During the loan period it is possible to convert the interest only French loan into a standard repayment mortgage using the funds in the investment bond to pay off part of the loan at any time in the first five years.

FMX French Mortgage Advice: This is an extremely tax efficient way of financing your rental property in France since all the interest repayments can be written off against your rental income.