| Financing
Your Property in France
It’s
important to understand the costs and the financal options
available when buying a property in France. I can’t
cover all your options, but let me mention a few to get you
started.
In almost
all cases, you’ll need to pay a deposit, usually around
10% to 15% in France. You can get the money for this from
savings, from re-mortgaging or selling property or other listed
under the chapter, ‘Consider your Finances’ in
the France Buying Guide.
Once you
decide to buy a property, you may choose to:
a. Pay cash
b. Get a Sterling based mortgage
c. Get
a French mortgage (this is in my view a good option, more
later!)
d. Get a mortgage in another currency
Let me briefly explain each of these:
a.
Pay Cash – Well, this is quite obvious. If
you’re lucky enough to be cash-rich you can pay for
your dream property or investment entirely with cash or simply
use cash to pay a deposit. However, there are reasons, for
example wealth tax issues, why you might want to get a mortgage
even if you don’t need to. Seek the advice of an Independent
Financial Advisor or French Mortgage Broker, in which case
I can recommend someone here if you would like me to. Click
on "need a resource" at the side of this page.
b.
Get a Sterling based mortgage – If you read
through the various magazines, you’ll notice that many
high street banks are offering mortgages for various European
countries. Contact either a bank or a mortgage broker to get
full information on rates, deposit requirements, security
and so forth pertaining to France…alternatively click
on "need a resource" at the side of the page.
c.
Get a mortgage based in France – you can buy
a property outright or get a mortgage.
It is
becoming increasingly easier for non French residents to obtain
a euro mortgage with a French bank. Indeed, some experts advise
that buyers who want a mortgage take one out in France rather
than in British Sterling. This means that if you are buying
back in Euros for investment purposes, you charge rent in
Euros, and then pay your mortgage without dealing with currency
fluctuations. The French mortgage market has become increasingly
liberal recently and there are many products on the market
to choose from.
The maximum loan to value for lending in France
is 85% with a 15% deposit, the maximum mortgage term is 25
years with rates from 3.80% and the maximum age at the end
of the term is 75 years - all of course subject to status
and change. The best option really does depend on your own
personal situation and on your objectives.
If you repay your mortgage in Sterling but
have a Euro mortgage, you could have issues if the Euro strengthens
against the pound – unless, of course, you’ve
fixed a rate of exchange with a currency broker ahead of time.
For example, on a €100,000 (£69,000)
mortgage, you’d pay €500/month (£345/month
if the exchange rate was €1.45 to the pound. However,
if the rate went down to E1.30 to the pound, the monthly repayment
would increase to £385. An instant increase of £45
extra per month – this is £540 a year!!!
To purchase
a property a deposit of at least 20% of the purchase price
is required and normally the higher your deposit, the better
interest rate you receive. Borrowers must take out a life
insurance policy. The French banks pay the money direct to
the notaire.
Tip
& Resource: French mortgage interest rates
are lower than UK ones, quite substantially as I write!
There are some very attractive rates out there and French
mortgage lenders are less likely to require an in depth
survey or even a survey at all of your property: They are
in general very well informed regarding the property market.
Your monthly
repayments cannot exceed 33% of your NET income and any other
loans you may have outstanding must be subtracted from the
33%. But the costs and taxes involved with the purchase will
be taken into account. Also the cost of the mortgage can be
offset against any income you receive if you let out your
property.
d.
Off-shore mortgage - You might want this sort of
mortgage because of tax issues. It’s best for you to
consult a professional to get comprehensive advice. Before
you decide on a property, make sure that you secure a provisional
mortgage offer. This means you know exactly what you can spend.
Your Independent Financial Advisor (IFA) or mortgage broker
can help you to decide on the best type of mortgage for you
and how much you’ll be able to borrow. For more advice
please go to: www.FranceBuyingGuide.com/resources.htm
and we will be happy to deal with your more specific enquiries
once we have received your form.
Some people have used their existing properties
at home to raise finance to buy their properties outright,
thus saving on interest and hassle.
You should budget on a portion of the purchase
price to cover purchase costs. This may include the transfer
tax, any VAT payable, legal fees, notary or legal fees and
land registry fees. Estate agents’ commission must also
be costed in – you need to ascertain whether the price
of the property includes OR excludes this….
Consider
hiring an accountant as well as a local English-speaking lawyer
(or a UK law firm with local solicitors to your property)
and possibly an architect. The accountant will be able to
guide you through complicated tax returns and explain the
taxation laws to you.
Go with your lawyer to carry out a final check
of the property before completion. You should check for fixtures
and fittings that were included in the price, and any structural
damage that might have occurred since your last viewing. If
there are any problems, you can ask for a reduction in the
price or some other form of compensation. This may slightly
delay the signing of the deed.
It is
highly recommended that you seek specialist advice from independent
solicitors and currency exchangers before buying any overseas
property. When
dealing with such large purchases many people fail to take
absolute responsibility for their actions. You must keep in
mind that the legal system in France may not be in your favour
if troubles strike, so it’s paramount that you hire
qualified people that can ensure your financial future.
Before
ending, I just wanted to mention a very helpful site that
you might find useful called Join Credit Expert. It allows
you to enter your details and get a free credit report. To
get more information, go to: Join
Credit Expert This will allow you to check your credit
history BEFORE you apply for a mortgage to ensure that it’s
correct and avoid any unnecessary delays.
For more
information on buying in France get the France
Buying Guide!
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