It is normal for the buyer to take out a mortgage in France to finance their investment. This will ensure that the buyer is best positioned to obtain a tax deduction for the interest borrowed against any rental income and minimises the requirement to put additional debt on their family home (Equity release).
French banks typically lend 80% of the purchase price (although up to 100% can be arranged in certain circumstances). You can expect to pay a mortgage registration charge of 2%(Stamp duty) and another 1% arrangement fee. In the case of a new property development a staged loan drawdown can be arranged usually with minimal repayments until the loan is fully drawn down.
Mortgage protection insurance will be required and is normally arranged through the bank. If you intend borrowing to finance your investment it is important that this is disclosed when you sign the preliminary purchase agreement (Compromis de Vente).
EXAMPLE 1 : Classic purchase
New
Resale
Purchase cost
150,000
150,000
French Loan - 80%
120,000
120,000
Personal contribution:
20% of purchase cost
30,000
30,000
Purchase fees/Stamp duty *
10,500
15,000
Total
40,500
45,000
* Estimated: New 7% and Resale 10%
EXAMPLE 2 : Leaseback purchase
(difference with Classic is that VAT is recoverable after building is complete)
Purchase cost, incl VAT (TTC)
150,000
Less VAT **
24,582
Net purchase price
125,418
French Loan - 80% of TTC
120,000
Personal contribution:
20% of purchase cost less VAT recovery
5,418
Purchase fees/Stamp duty - 7%
10,500
Total
15,918
** Typically this is received back 6 months after the building is complete. Most purchasers take out a short-term bullet repay loan from their personal Bank to finance this.
Oui Can Do are licensed by the Irish Financial Regulator to provide French Mortgages and work with a number of partner banks in France to get you the best possible financing deal. We can look at a variety of financing options to suit your cashflow requirements. Contact us today and we will work with you to get the best financing appropriate to your type of investment. CLICK HERE
WARNING :
Fixed rate
You may have to pay charges if you pay off a fixed-rate loan early.
Debt consolidation
This new loan may take longer to pay off than your previous loans. This means you may pay more than if you paid over a shorter term.
Variable
The cost of your monthly repayments may increase - If you do not keep up your pay more than if you paid over a shorter term.
Interest-only
The entire amount that you have borrowed will still be outstanding at the end of the interest-only period.
Subscribed to the Code of Conduct of the NPSRA (National Property Services Regulatory
Authority).
Crawley Business Consulting is authorised by the FINANCIAL REGULATOR
