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Buying a property in France
If it’s your first time, purchasing a property in France can be a daunting prospect. However, the process can be simplified if you carry out extensive research and enlist the help of people who are dealing with French property transactions on a day to day basis, giving you peace of mind in the knowledge that all aspects of the purchase process will be covered.
The buying process in France
Firstly, you need to decide what your aims are when purchasing a French property. Are you looking to use the property as a holiday home, or to rent it out to generate an income? Or maybe the purchase is purely for investment purposes, and you do not intend to use it at all. These factors will greatly influence where you buy, and what type of properties you consider, and it is worthwhile doing your research thoroughly.
Once you have decided on the property you wish to buy, and your offer has been accepted, you will be expected to pay a deposit of between 5% and 10% of the purchase price. At this point you will probably be making your first transfer of funds to France and you need to be aware that making payments in a foreign currency will mean you are exposed to movements in exchange rates. The exchange rate you receive when you make the transfer is likely to affect the final cost of the property you are buying.
You will also now sign a preliminary contract, usually known as a ‘Compromis de Vente’. This can be drawn up either by a notary or estate agent and commits both vendor and purchaser to the transaction. It is important that any questions about the property are answered before signing this document.
As the buyer, you will benefit from a 7 day cooling off period during which you may pull out of the transaction without penalty. If you are seeking a mortgage, make sure a ‘clause suspensive’ or conditional clause is included to ensure your deposit is refundable should a mortgage offer not be secured.
The legal process is now underway, and your Compromis de Vente will specify a date by which the final deed or ‘Acte de Vente’ must be signed. Generally this is approximately 3 months later. During this time, the Notaire will carry out all the requisite legal checks on the property, and if you require a mortgage, this will need to be arranged.
You will be expected to sign the deed either in person at the notary’s office, or by way of a Power of Attorney. Should you choose the latter option, allow plenty of time for the legal paperwork to be arranged. The balance of the purchase price and all legal fees, including any mortgage registration fee must be paid by this date, and your notary will provide you with a breakdown of all sums due in advance. Buildings insurance must also be in place for completion.
It is important that you understand what you are signing, and we strongly recommend you use the services of an English speaking advisor or lawyer to translate your legal paperwork and guide you through the process.
Keys will be handed over at completion, and the property is now yours!
Taking out a French mortgage
If you are taking out a French mortgage, we would advise you to start the process prior to signing the Compromis de Vente, and obtain an agreement in principle from a lender. By securing an agreement first, you will be confident in the knowledge that a specified loan amount has been pre-approved. This can give you confidence when making an offer on a property and/or signing a Compromis de Vente, as well as saving time once the clock starts ticking.
Eligibility for a French mortgage is assessed differently to the system we are accustomed to in the UK and is based on the applicant's capacity to repay the mortgage. As a guideline, your existing monthly outgoings as well as the monthly repayment on your new French mortgage should not exceed 33% of your gross monthly income. A percentage of any rental and investment income you receive can be considered. Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings.
French mortgages are full status and therefore proof of income and outgoings will be requied to submit an application to a lender.
Both interest-only and repayment mortgages can be arranged on a variable or fixed-rate basis, or a combination of both. Terms can be from 5 to 40 years and loans must be repaid by the age of 80. Many products do not have any early redemption penalties.
Life assurance is mandatory with the majority of French lenders, and many require borrowers to use their chosen provider. In some instances, it may be possible to utilize an existing or new UK or French policy.
Once you have obtained financial approval and found a suitable property, the lender will instruct a valuation to ensure that the property you are purchasing is worth the price that you are paying.
Once a satisfactory valuation has been carried out and life assurance is in place, a mortgage offer will be issued from the lender. A copy will be sent to you and a draft copy to your Notaire, so that he can start to draw up the deeds for completion.
You will be required to open a bank account before completion, from which your mortgage repayments will be debited. Most lenders do not offer this service so you will need to open an account with a bank close to your property during a visit. Missing a mortgage payment in France may have serious consequences and you are strongly advised to arrange for monthly debits from a UK account. A number of foreign exchange providers offer a renewable 12 month regular payment plan where the exchange rate is fixed at the start of the plan, and the agreed amount will be debited from your UK account and sent to your French account each month.
According to French law, you are obliged to keep the mortgage offer for a ‘cooling off’ period of 11 days before returning it to the lender. Once this time has passed, and you are happy with the conditions of your loan offer, you will need to sign it and return it to the lender. At this point, your Notaire will be informed that you have accepted the mortgage offer, and will be sent full copies of all documentation.
You can now set a date for completion, and your Notary will request funds directly from the bank.
As a specialist broker with bi-lingual Consultants, IPF will consider your personal situation and requirements and find you the most suitable mortgage deal available in the market.
French mortgage best buy table:
Loan amount - €250,000
|Type of mortgage||Maximum LTV||Starting rates from||Interest Only
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*Based on a 20 year term
This information should only be used as a guide. All product specifications will depend on the individual’s financial circumstances. The products mentioned here are for non-resident clients, other products will be available for residents. For a personalised French mortgage quote please contact International Private Finance Ltd or submit your information online. Information correct as of 07/03/08.
For more information on how to raise finance to buy in France or in any other European Country.
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