With many years of experience French Realty Company provides a comprehensive service to clients looking to buy or sell property on the French Riviera, the French Alps, the Languedoc region and near Biarritz. We will help you source the property that you are looking for, complete all the paperwork, arrange a mortgage, open a bank account, arrange insurance (life cover, building & contents), foreign exchange and liaise with the Notaire to ensure that your purchase goes through successfully.
Both real estate and mortgages in France are highly regulated, making it one of the most secure property markets in the world and one of the reasons that it’s long been a popular place for investment and second homes. That said, arranging a French mortgage and buying a property can still seem like a minefield to the uninitiated. To help, here are some key points to consider…
Whether you are looking for a holiday home, an investment or a combination of the two, in the France you have a couple of options…
Holiday Home / Buy to Let
Throughout France there are a wide range of chalets, villas and apartments available for all budgets. Should you want to receive an income from these properties, local management agents will be able to maintain and manage the rentals for you. Typically you would expect to pay a management fee of 25% plus costs such as cleaners, taxes and insurance.
This is a form of buy to let that was created by the French government in the 60’s. Essentially you would purchase a chalet or apartment and then lease it back to a hotel group in return for a guaranteed rental income.
As part of the government incentive, investors receive a 20% VAT rebate off the purchase price and owners can deduct 4% pa for depreciation against income, which when combined with a mortgage repayment will virtually eliminate French income tax for the first 20 years.
From a UK income tax perspective, French Leasebacks qualify as “Furnished Holiday Lets” which mean they are exempt from the changes announced in the 2015 Spring Budget affecting landlords of UK buy to let properties. You can also offset the cost of travelling to France each year to view your property.
Leasebacks offer the advantage of a hands-off property investment, with tax incentives, that owners can use for up to 6 months a year.
French banks will calculate affordability of 1/3rd of your income before tax. For example, you earn £60,000 pa which means that the bank will accept that £20,000 pa can be used to pay for the rent or mortgage on your main residence plus any other mortgage repayments that you make, including the new mortgage on the property in France. (This is a very simple example and some banks are more flexible in their criteria, but this will give you a good estimate).
Loan to Value or LTV is the percentage of the purchase price that you can borrow. Non-residents can currently borrow up to 85% of the purchase price, which means that you would need to contribute a 15% deposit plus the legal fees paid to the Notaire. The banks will also charge an arrangement fee of 1% but this is often capped for larger mortgages.
All French banks require life insurance and the policy will need to issue before the mortgage starts.
The interest rates, lending criteria and types of products vary greatly from one bank to another. It really is worthwhile seeking advice from our independent mortgage advisers before starting the process of buying a property.
Unlike in many other countries where the buyer and seller would each appoint a lawyer to represent them, in France a Notaire is appointed to handle the property transaction for both the buyer and seller. This is because the Notaire does not represent each party, but instead acts on behalf of France.
The Notaire’s primary responsibility is to make sure that all matters relating to the purchase are legally correct, which ensures that the buyer is protected under French law. The Notaire’s role includes everything from ensuring the title deeds are properly compiled, through to checking that the property has the necessary planning and permissions.
When paying a deposit, ensure that this is held by the Notaire instead of the estate agent. (French Realty Company does not accept clients deposits). Also, if possible ask for an English speaking Notaire to be appointed.
If you are buying a new property from a developer then you will sign a Reservation Agreement, if it’s an existing property then you will sign a Compromis de Vente (Sales Agreement). You should either receive an English version of the contract, or ask the Notaire to explain it to you in detail, but only the French version is a legal contract.
These agreements tend to be standard and will allow you a 10 day cooling off period after signing, which gives you the option to change your mind and withdraw from the purchase. The Notaire will then refund your deposit. You also have 30 days to arrange a mortgage, although it is worth asking for this to be extended to 60 days as it can take this long to arrange a mortgage in France.
The British Pound is currently at a six year high against the Euro making this an opportune time to buy property in France. However you can save even more money by using the services of a Foreign Exchange Dealer. Their services are available to anyone not just the ultra wealthy, and they will typically save you 3% to 5% on the exchange rates offered by the high street banks, which makes a big difference when you are considering buying a property.
France has double tax treaties with most countries around the world. This ensures that if you pay any tax in France, that tax is deducted against any tax liability in the UK, if any.
Owners of French property should be aware of income tax, capital gains tax, taxe foncier, taxe d’habitation and wealth tax. This can seem like a lot to cope with but the French tax regime is clear and well regulated, making it fairly simple to organize. You can also simply appoint a French accountant to deal with this process on your behalf.
Services available through French Realty Company…
- Property Finding Service
- Independent French Mortgage Consultancy
- Foreign Exchange Dealers
- Independent Insurance Brokers (Life, B&C, Health)
- French Bank Accounts
- Property Management Services
- English Speaking Notaires
* There is no additional charge for arranging a French Mortgage, Foreign Exchange, French Bank Account, Building & Contents Insurance, Life Insurance and liaising with the Notaire.