How To Finance Buying A Property In France
Finance Buying A Property
Despite French Notaires reporting rising property prices in France, generally these price rises are most evident in towns and cities, particularly Paris, which luckily means that French rural property, the most popular purchase with Brits, is still a huge bargain. Many rural properties cost less than half the price of anything similar in the U.K. and the attraction of these low prices, better climate and a different lifestyle means that many Brits continue to buy a property in France. For most people this means considering the best way to finance buying a property in France.
Financing A Holiday Home In France
If the French home is planned as a holiday home many buyers often think about raising the to finance buying a property finance by releasing equity in their current home in the U.K. This may not be the wisest decision!
There are several reasons why it is more sensible to look at raising a French mortgage to buy your French holiday home.
- Protect your French purchase. When you sign the first contract to buy your French home you will have to answer questions about how you plan to finance the purchase. If you are intending to raise a French mortgage, information stating the supplier, the type of mortgage, the amount, the length and the interest rate will be quoted in the contract. Should your application be refused you will be entitled to a refund of the 10% deposit that you will have paid when signing the first contract. There is no other way of raising the purchase funds that will be protected in this way and should you be unable to raise the funds through any other source than a French mortgage your deposit will not be refunded.
- Protect your U.K. home. If unfortunately you find that you are unable, at any time, to make the mortgage repayments on your French holiday home your U.K. property will not be at risk if you have bought your French home with a French mortgage. This is a very serious consideration ; buying a French home with a French mortgage is the safest option.
- Low interest rates. French mortgage interest rates remain very low at the moment making a French mortgage very attractive.
With so many important factors making a French mortgage for your purchase of a French house the sensible option it is interesting to consider why some people still prefer to mortgage their U.K. home. It seems that some people, understandably, worry that it will be difficult, confusing and lengthy to raise mortgage funds in France. This is not correct, most French banks have dedicated teams working with expats who apply for a mortgage. These teams are all English speaking and understand that the process of mortgage application in France may be a little different from that which potential buyers are used to. Any good French bank will explain everything to you carefully and will help with all the questions you may have. In addition, your French mortgage supplier will work with the Notaire in France throughout the purchase and finally ensure that funds are available on the due date to complete your purchase.
Over the years I have known buyers thinking that they will sign the final contract on a certain day then finding that the Notaire hasn’t received the funds. Another unplanned night or two in a hotel while waiting anxiously to find out what went wrong! Not the best way to start your home ownership in France!
At Healey Fox we have worked with BNP Paribas for many years to help our buyers finance their purchase. The English speaking team at BNP Paribas are happy to discuss your intending purchase and your financial requirements. Once you have had an offer on a property accepted our mortgage partners will find the best possible mortgage for you and liaise with the Notaire and agent throughout the purchase procedure to ensure that everything proceeds smoothly leaving you free to enjoy the anticipation of owning your own home in France.
Financing A Permanent Home In France
People who plan to buy a permanent home in France tend to fall into two main categories, the young families looking for a better way of life and retired people. Sometimes we have buyers who have been able to find full time employment to make their move to France easier and for such people raising a French mortgage on the basis of their French income will be straightforward. Most retired people plan to have cash, released from the sale of their U.K. property, for the purchase so they too have a simple, straightforward way to finance their purchase. It is the group of people who want to move to France to enjoy the way of life but who still need to raise finance for the purchase of a French property. Normally these are people who plan to create an income in the hospitality sector, usually with a property that can be used as a chambre d’hôtes business or that has gites to rent out.
- Finance Buying A Property
- Living the rural life in France
- Start a new life in France
- Planning to retire to a home in France
Unfortunately the news for such people is not good. The current advice from BNP is that…
“Most lenders providing a dedicated service for non resident buyers in France only grant mortgages for residential properties (main or second homes). These may be used sometimes for holiday lettings but the underwriting is based on sustainable professional or retirement revenue rather than “gîte” income.
Raising finance to set up a “gîte” business in France is governed by different rules in both in terms of financial assessment and also consumer protection.
– The bank concerned would have to assess the viability of the business plan both in terms of the “gîte” location and also the applicants’ experience (or lack of) in such activities. The percentage loan-to-value would also be a key factor and is unlikely to be as high as for residential mortgages.
– The loan if granted would probably be considered as a business loan to professionals and therefore would not be subject to the French consumer protection laws (“loi Scrivener”) with for example the compulsory 10 day consideration period, even if you intend to live there. In this area professional advice from specialist lawyers and/or tax adviser is recommended, to help the applicants choose among different solutions for owner and professional status depending on their situation.
The applicants may still have the option to raise finance on their UK assets by using a sterling equity release mortgage, and find this quicker and easier. However two disadvantages of this are :
– a mismatch between the French euro based asset (the property) with its euro rental income on the one hand, and the sterling liability on the other.
– it may be difficult to claim relief for the UK interest payments in the French tax return which the “gîte” business would have to file.
Finally, as for which banks to approach, there is no simple answer but it would make sense to start with local banks close to where the “gîte” is situated.
BNP Paribas International Buyers specialise in financing residential properties only and do not currently finance properties which have or will have a commercial activity.”
If you would like to discuss your property buying plans or if you would like us to direct you to our dedicated partner at BNP Paribas who can assist you further with your French mortgage requirements, call Healey Fox +44 (0)1306 775 008