French property mortgages
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OurPurchaseChecklist Deciding that you are looking to buy a property in France is easy: you’re spoilt for choice. Although much of the process takes place in a foreign language, and is subject to French law, the steps that you have to take are equivalent to buying a property at home. Here are some considerations to help you with your French property purchase. A surprising amount of the preparation can be done before you come to France. Indeed, you will have to produce a lot of routine documentation to satisfy all the French administrative procedures, so fore-warned is forearmed. Deciding what you want to buy Really the first questions are the choice between an apartment or a house, town or country, new or old, and whereabouts? Your choice may be guided by what you see yourself doing once you have a property. Is size important? Would you like to be in the town or countryside, near to a golf course, ski slopes, coast? People who suffer from hay fever will not enjoy a country retreat, for example. Many people only take their holidays, or start their house-hunting at one time of the year. It is important to understand what the climate will be like in other seasons. There are some obvious advantages to buying new-build, such as the 10-year guarantee for structural soundness, and reduced rate Notaire's fees, but modern homes tend to have smaller rooms and gardens than older ones and the garden will take time to mature. Our partner brokers are used to sorting out mortgages for new houses, including those bought off-plan. They will release mortgage funds in stages, just as they do for French borrowers. You should indicate if you are buying a VEFA property on our French mortgage enquiry form. Older properties may have larger rooms and more character. They offer more scope for the owner’s imagination, through renovation. On the other hand, they may be more expensive to heat and need running repairs. Some fixtures and fittings will be at the end of their life (or, possibly never were installed in the first place). Mortgages arranged through BestFrenchMortgage can cater for both your immediate cash needs and later renovations. Think about your must-have features, which it will be difficult to add later: a garden, garage, cave (cellar), terrace or balcony, etc nearby cafés and restaurants, access to doctor and dentist and local shopping including that excellent French baker. The most suitable property for you depends on whether you plan for it to be your main residence (immediately or later), second home, holiday home to be let out occasionally, or a buy-to-let investment Deciding how to pay for your property Do you want to pay cash, will you borrow at home and use the cash raised there to buy in France, or would a French mortgage be a sensible choice? You might even want to consider a Euro Switch product so that your overall mortgage interest charges are minimised. For more information on Euro Switch mortgages go to our Market Trends page. Although you may be able to afford to pay cash, this will lock up your capital. If you decide to extend your existing mortgage, always bear in mind the warning "Your home may be repossessed if you do not keep up repayments on your mortgage". You may be putting your main home at risk for the sake of your holiday home. A French mortgage will be Euro-denominated and charged at Euro interest rates. If you plan to earn some rental income from the property, this can be collected in Euros and put towards the repayments. If you would like an idea of what a French mortgage would cost fill in the French mortgage enquiry form. For EU (including UK) residents and taxpayers the minimum deposit is normally 15% of the purchase price but in some cases a 100% mortgage is possible. For those outside EU, the minimum deposit is 20%. French mortgages are normally repayable when the oldest borrower reaches the age of 70 though some lenders accept 75. We can, in some circumstances, arrange for a higher age limit subject to special insurance conditions. Preparing yourself to buy Wherever you decide to buy, you will have to produce documentation about yourself and your family, so it’s a good idea to assemble the paperwork before you leave home. If you take original documents, many French administrators will be happy to make their own photocopy. If they request a document to be sent later, they are quite likely to asked for a certified copy (and possibly a translation, too). A useful dossier, to prove your civil status and financial standing would include passport, birth and marriage certificate, final decree from a divorce, proof of residence in the UK (such as a driving licence or Council Tax bill). It is also useful to take along a utility bill as proof of address, as this is commonly accepted in France, and recent bank statements, showing income and outgoings. A letter from your bank, confirming that you hold an account is also useful if you don't have a bank statement to hand. If you need to confirm your income, recent pay or pension slips for the last 3 months and a year end tax certificate (P60 in the UK or the IRS equivalent) are the best documents for employed people and the retired. Self-employed people should have a copy of their last 2-3 years accounts and tax returns. If you don’t already have a French bank account, our partner brokers can help you set one up along with your mortgage at no charge. Finding a property For some people this is where they get most fun, while for others frustration sets in. You can take some of the stress out of the process by being well prepared and remember it’s not necessary to have much French to go house-hunting. It is not usually possible to view French property on Sundays or Bank Holidays. Estate agents (agents immobiliers) are usually local to an area and therefore will only have properties for sale within that area. The agent earns commission from the sale of the property and will try to obtain the best possible price for the vendor, but will probably have a shrewd idea of the lowest price a vendor will accept. It is quite common for the asking price to be deliberately set 5%-10% above what the agent believes to be realistic. One reason for the higher fees at French estate agents is that all viewings are accompanied, and you will normally be taken to the property in the estate agent’s car. By arrangement the agent will be able to sign for you, as a proxy, at the Acte de Vente and arrange the transfer of utilities. Private sellers also exist, but may not set a price at market rates and are unlikely to help you further with the purchase process. The window price of a property is usually shown as FAI (Frais Agence Inclus). Sometimes agents appear reluctant to phone a client in front of you, because the offer price to the vendor will be exclusive of their fees. Most estate agents are members of FNAIM, the Fédération Nationale des Agents Immobiliers, or ORPI. Now might also be a good time to remind yourself the points in our Consumer Guide. Just as at home, it’s worth taking a digital camera, torch, tape measure, small compass, dictating machine and notebook & pencil on a property viewing trip. It can be helpful to complete a checklist for all the properties which you view, so that you can compare them afterwards as it is not usual for French estate agents to produce particulars. Establish whether the property has electricity connected, gas (bottled or town), phone, broadband (ADSL), TV, fosse septique or mains drainage. In France, utilities charge by the metre from their current nearest point to your property for a new connection to their services. Whilst viewing the property, you should note the condition of the walls, windows, roof, chimney and drains. Ask the agent or seller why the property is for sale and how long the property has been on the market. Try to find out what the neighbourhood is like and consider whether you would fit in. If you see a property you like, go back later (different time of day/week), unaccompanied, to check out the district, visit the bar, talk to the locals. In holiday areas, it is important to establish how many businesses close at the end of the season, as this practice is very common in France and whether the area would be swamped with visitors during the holiday season. If the property has its own garden or grounds, you should take note of the state of boundary walls, gates, fences, patio, pool area, outdoor structures such as sheds, pool house, lawn, flower beds, irrigation, shrubs, trees, shade and outdoor lighting. These can be difficult or expensive to change. It’s important to establish who is responsible for the boundary fences and whether there are any rights of way. In apartment blocks you should consider the common parts, which can only be updated when the whole co-propriété votes for the work. Once in your chosen part of France, it is usually possible to buy 1:25000 scale IGN Série Bleue maps of the area showing contours, water courses, power lines etc. Choosing the property that is right for you However much research you do, and however many checklists and costings you draw up, the most important choice is a property that feels right. The legal process If at all possible, allow one working day at the end of your visit for completion of the preliminary negotiations and paperwork. Sale and purchase of French real estate is governed by French law whoever is buying or selling the property. Understanding what is going on may help you understand why it takes the time that it does. The Notaire is a public official, addressed as Maître. A notaire is responsible for the conveyance, preparing the various documents and confirming the seller's title to the property, checking that there are no other mortgages on the property, etc. The notaire’s main responsibility is to see that the French record of property ownership is correct, rather than to be concerned about the individual’s personal circumstances. There is no conflict of interest if both parties use the same notaire; if they use separate notaires, the fee is divided between them. The Compromis de Vente is the first part of the sale process. The notaire or estate agent can draw up the Compromis de Vente. The Compromis de Vente is a legal contract; you should read it carefully before signing it to check that all the details and conditions are correct, such as: · Details of the vendor(s) and purchaser(s): make sure that your names and addresses, which may be unfamiliar to a French person, have been spelt correctly. Although the Compromis de Vente contains a clause suspensive to allow for mortgage finance to be arranged, time is of the essence and if you do not make reasonable efforts to obtain mortgage finance in time, you could forfeit the deposit. Some agents are reluctant to take a "clause suspensive" buyer seriously as a surprisingly high percentage of deals in France fall through when the buyer can't raise the funds and exercises their right to withdraw. (NB the upside of this is that many "sold" properties come back on the market after about 6 weeks: It is not unusual for a seller to be disappointed 3 or 4 times in a row by purchasers withdrawing!) For this reason, it is much safer to obtain a prior decision in principle from a lender: It may also help you get a better price as you are almost a cash buyer. If you sign a Compromis de Vente affirming that you will not be relying on mortgage funds to complete the purchase, you may find that you will not be permitted to change your mind later. On the other hand, it is possible to discard a French property mortgage decision in principle. A short time before the notaire is ready to complete the transfer, you will be sent a draft (projet de l'acte) of the Acte de Vente, which is the final deed of sale. It will contain much of the same information as in the original Compromis de Vente, but again needs to be checked thoroughly. The Acte de Vente will also state the date that you may take possession of the property. If you have not already done so, you will be asked to produce your birth certificate and passport, together with marriage certificate and divorce decree, if applicable, to confirm your civil status. If you think you will be unable to attend the signing of the Acte de Vente you should give a mandat to authorise someone to act on your behalf: a reputable estate agent usually offers this as a free service. Once the Acte de Vente has been signed and witnessed, the notaire has to pay all the taxes, settle all the accounts of the purchase/sale and register the deeds and mortgage. A few months later you will receive a certificate informing you that the title has been registered. The original title deed is kept by the notaire, but the Notaire’s Etude is able to make authorised copies. Other costs to face up to Commonly referred to as notaire’s fees, there are a number of taxes and charges that the notaire collects and which are commonly termed the “frais d’acquisition”. As well as the notaire’s own charges, which are subject to TVA, the notaire collects taxes on behalf of the French state and incurs charges both locally and at the registrar of mortgages. For new build, the notaire’s total charges will be about 4% of the purchase price: for an existing property they will be around 8%. (Notairial fees can be included in the mortgage amount for French tax payers but not otherwise.) Eventually you will receive a detailed account of the frais d’acquisition, together with a refund or a request for the shortfall. All properties must be insured from the date of ownership. Many buyers find it easiest to take over the existing householder’s policy. Taxe foncière (land tax) The owner on the first day of January is liable for paying this tax, which is collected in the autumn. Taxe d'habitation (local taxes) Once the property is furnished and has water and electricity it becomes “habitable”, however infrequently it is used. The tax varies by location, according to the size of the property and its facilities. From 2005 television licence fees have been included in the taxe d’habitation. Charges de Copropriétaires (maintenance charges) The maintenance of shared parts of a complex, such as an apartment block, is paid for by the Copropriété using funds raised from owners. Charges will vary according to the size and quality of the complex, whether there are lifts, a caretaker, a swimming pool, shared gardens, secure parking, etc. You should consider the extent of these charges before signing the Compromis de Vente as they can be considerable for luxury blocks. Ask to see previous years’ accounts and minutes of residents’ meetings to check that all is in good order and hat there is not a backlog of maintenance which will be sprung on you in the next couple of years. Taxe de plus-values (capital gains tax) There is no capital gains tax incurred if you sell your main home to buy another. Capital gains tax applies when you are selling a secondary residence within 15 years of purchase. The tax is applied to the difference between the sale price and the original purchase price, taking into account any improvements for which you can produce valid receipts can and of course the purchase and sale transaction costs. After a delayed start of 5 years, the tax is reduced by 10% a year. The Notaire will calculate the tax due and take it out of the sale proceeds. ISF (Impôt de solidarité sur la fortune) Wealth tax affects those with worldwide assets over €732,000 (2005 rate) and is calculated in bands above that figure. French residents and non-residents with assets in France are taxed on the basis of their assets as at 1st January each year. Taking ownership Once the purchase is complete, you are free to enjoy your French home. By this time you must certainly have your new French bank account. With many bills attracting penalties for late payment (majoration), setting up monthly direct debits can bring peace of mind. Bank charges are generally higher than in the UK, but a cheque book, Eurozone credit card (cheaper than world-wide) and regular statements are a good idea. Electricity: in France various tariffs are available, depending on the property’s maximum consumption. Visit EDF to find out which is best for you. Telephone: Phone operators in France offer many different packages. Research what would suit your usage pattern. Don't forget that if you will be connected to the Internet via broadband (ADSL) you will be able to dramatically reduce the cost of your phone bill using VOIP (voice over IP) services such as Skype. Plumbing: check that you know where the stopcock is and the route of the pipe from the mains on to your property. You would be charged for any leaks on your side of the water meter. Chimney sweeping: any chimney, which is used, has to be cleaned annually. Insurance: many French contracts work on a tacit renewal basis. After completion, you have the time to investigate whether there are better insurance policies available, and give 2-3 months’ notice to your existing insurer if you decide to change. Mairie: in France, the local Maire likes to know the people in the commune, especially in country areas. It’s usually worth getting on good terms with the Maire, who is responsible for granting planning permission. Rubbish: France is heavily committed to recycling and local schemes make this easy. The Mairie is a good place to start; they may even supply rubbish bags and recycling boxes. In France, you usually need to take proof of local occupancy (such as a utility bill) with you in order to be allowed to use the local tip. Furniture: French furniture is generally slightly smaller than its UK equivalent; try before you buy is the best test. If you're tall don't forget that IKEA does not reduce the size of its furniture for the French market so you can still get a full sized bed! Delivery: a surprising amount of goods, especially bulky items, can be delivered at no extra cost, so it is always worth enquiring if you shop locally. Local delivery drivers seem able to find the most remote places, provided they have the code postale. The delivery van will also normally take and dispose of old bulky items such as refrigerators and washing machines if you are buying replacements. Neighbours: Most French people are still very well disposed towards newcomers and foreigners. Even if you don’t speak much French, it is usually worth trying to get to know people nearby as early as possible. Once their curiosity is assuaged, they will often do all sorts of things to help you. Whatever the mortgage question, the answer is BestFrenchMortgage |
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