Home Business Mortgages

For some, the idea of moving to live and work in France is a lifelong dream. Specialist magazines are full of success stories about people who have taken the plunge so, with jobs in the traditional French labour market hard to come by, combining your home and business can give you a great lifestyle which puts you in control. For many it's the smart answer.

In France banks require borrowers to show a main source of income other than the rental income expected to accrue from the home and business property being financed. This condition seems to be the least well understood and accepted condition of French mortgages so we explain it more fully on the following tab.

Choosing the right lender that really understands your needs for your French home and business mortgage can save you considerable frustration at the outset and give you significant cost savings over the life of your French mortgage. Best French Mortgage have the experience to find the right specialist lender for French home and business mortgages so, to apply now, click here.

Home and Business Mortgages or Commercial Finance

You need to understand the difference between French home and business mortgages and French business finance because all mortgage lenders make a big distinction between the two types of finance.

Simply, the distinction is that for a French home and business mortgage you need to show that you can repay your mortgage (at least initially) from income that is generated from sources other than the property on which your French home and business mortgage is secured. It is essentially a retail mortgage product with no restriction as to whether you use part of the property for business purposes. French home and business mortgages are usually the right answer for people wishing to make a transition to France over a relatively short period of time, say 1 to 5 years, perhaps as a step towards early semi-retirement.

If you need French business finance for a project which will be your sole source of income then French home and business mortgages are probably not the answer and you should look at this page to find out how we can help you best. French business finance is usually the right answer for people wishing to take over an existing French business or create a French business from scratch.

This distinction is absolutely central to understanding the mortgageability of your French property.

Let's look a some examples to test your understanding of what is and is not allowed under the heading of French home and business mortgages.

1. You continue your normal job but intend to set up a B&B in your house which you or your partner will run in parallel. Is this allowed? Yes No
   
   
2. You are an established consultant and intend to set up a prestigious home office in an outbuilding to work from. Is this allowed? Yes No
   
   
3. You are a skilled craftsman with a need for extensive outbuildings. You have an established business, running as a limited company, but you decide to buy a property in France where you can move your business to, to avoid the need to rent premises. Is this allowed? Yes No
   
   
4. You decide to give up your career, move to France and start a new life with a new business which you will start when you arrive and run from home. Is this allowed? Yes No
   
   
5. You decide to continue your career, move to France and start a new life. The plan is to set up a a new business which you will start when you arrive and run from home. If the business succeeds you plan on giving up your old career after some months. Is this allowed? Yes No

To check your answers, click the answers bar below.

 

Choosing a suitable property

The first step towards creating a home and business in France is to find a suitable property, well located to serve your target market. Many people prefer to start with a clean sheet and convert an old property such as turning a farm into a gîte complex. Others prefer to search for an existing business where the previous owners may have addressed the needs of the market they understood but who may have missed the obvious. For example, finding a failing small country town hotel where the owner had not realised the potential business that could be generated by the recently opened golf course 5 kilometres up the road.

Today, most guests want private bathroom facilities and few older French properties offer en-suite bathrooms with every bedroom. This is particularly the case with old hotels where you may need to halve the number of bedrooms to upgrade the accommodation to today’s standards. Sound insulation is also an important consideration and can make the difference between your business being recommended by word of mouth: or the contrary!

The facilities you offer will need to be matched to the duration of your guest's stay. If people are choosing your property as their main holiday destination, they may want a swimming pool or a BBQ area. If they are only staying for a few nights, they may still want a residents’ lounge or terrace, as well as their sleeping accommodation.

As we know from our own business, a lot of today's businesses can be internet based. Though many people that think of a French home and business as a business dependant on location and physical infrastructure, such as a B&B, gîte complex, camping site or shop, but new technology has created other options. Broadband (ADSL or in French "haut débit") is now widely available across France and the French, with 26.4% of the population having access to broadband, are ahead of the Americans at 25% and only just behind the British at 27.6% (June 2008 OECD figures). It is often far easier to obtain French home and business mortgages for technology based businesses than for more traditional businesses because, from the French home and business mortgage lender's point of view, the percentage of the mortgage devoted to the business is smaller, often just a small office and storeroom.

Whatever your business idea you will want a clear business plan, if only for your own peace of mind. This means you have to make sensible estimates of the costs, revenues, length of seasons and average spend to name but a few items. While everybody hopes to be at full capacity during peak season, it can be harder to attract guests out of season. Your business plan must show how your marketing effort will help fill empty weeks. Best French Mortgage now have a specialist French business finance service which can help you review your business plan and funding requirements to give you the maximum chance of attracting the funding you need.

A Gîte Complex

A gîte complex, one of the main choices for a French home and business, is a collection of separate letting units gathered around a central focus, such as a courtyard. Typically, the complex is a collection of agricultural workers’ cottages or refurbished farm buildings.

Many people find that they have sufficient funds to buy the property, which is likely to be larger than average, and refurbish the first couple of buildings to start the cashflow rolling for the second stage. Unfortunately, this may mean that the early visitors feel that they are staying close to a building site, without the full facilities of the completed gîte complex.

Income from renting the gîtes must, of course, be declared. The taxable income will be net of business expenses, such as interest. Using a mortgage to help you buy and convert the first few letting units will help you to preserve your own cash until the rental income is well established.

Under French law, early repayment penalties on French mortgages are limited to 3% of the outstanding capital, so you will be able to redeem your mortgage early when the business takes off: In many cases Best French Mortgage will be able to negotiate the early repayment penalty out of the mortgage contract.

The likely cost of buying a gîte complex, or a location suitable for conversion, will vary according to the facilities to be offered (such as a pool), the quality of the accommodation (such as fully fitted kitchens and en-suite bathrooms) and the size of the property. These same factors will contribute to the future income stream, so a vision of your business will give the lender additional confidence to lend so long as you meet the lenders qualifying criteria.

Sharing your home with Bed and Breakfast guests

Many people who move to France think that they can extend their income and meet travelers by turning part of their property into Bed and Breakfast accommodation.The French have long offered Chambres d’Hôtes, literally staying with your hosts.

If you would like to extend this sort of hospitality, one important consideration, when choosing your property, is whether other people will want to stay there. Location speaks for itself: there are more B&B rooms near major tourist attractions than in isolated locations so if you want to get away from the crowds you'll need to emphasise a theme to attract visitors. Facilities (such as en-suite bathrooms, home comforts, secure parking) are very important, particularly when people are traveling in strange parts.

These factors may also have a bearing on the price of the property you buy. A mortgage could make the difference between a house with a spare bedroom, which you could afford easily, and the possibility of buying a stunning property which people will visit, enjoy and recommend.

Provided that you do your research to determine the likely yield from running a B&B business in your French home first, there is every chance that your dream could well come true.