You’ve established your overall budget for the purchase of a house in France, and you might have already been in touch with us to determine your maximum borrowing capacity (if you haven’t yet, you can do so HERE). But before you find the French property of your dreams, it is important to check that you have budgeted for all the costs involved.
When buying a home in France you will need to appoint a notaire (solicitor), who will ensure that the transaction is legally compliant and that all of the associated property taxes are paid in full. Notaire fees are often the single largest expense you will need to cover when purchasing a property in France. Note, however, that the majority of those fees are not devoted to the legal costs of buying a home, rather to the French equivalent of stamp duty.
There is no need to shop around for the cheapest notaire, as their fees are fixed by law. We do recommend, however, that you choose a notaire who can speak English (or has a staff member who can), as this will facilitate the transaction.
Notaire fees depend on the price of your new home, and on whether it is a new build or an existing property. Typically, for an existing property, we estimate the notaire fees at around 7-8% of the purchase price, or 2% for a new build property. But, because some of those fees are set fees or have minimum amounts, the notaire fees could represent a higher percentage on a lower price property (for example: 11% notaire fees on a property price of 48,000€)
In order to have a good indication of the actual amount you would pay, have a look at the official website for notaires in France. They have a useful fee calculator in English: www.immobilier.notaires.fr/en/fee-calculator
Estate agents in France charge for their services in a very different way to those in the UK and the rest of Europe. As soon as you approach an agent in France about a house you’re interested in buying, you should ascertain whether or not the listing price includes the agent’s commission. Most asking prices include commission, but you should look for the term ‘FAI’, which stands for ‘frais d’agence inclus’. This denotes that all of the agent’s fees are included (paid for by the buyer as opposed to the UK system). However, if you see ‘TTC’ as part of a property listing (which stands for toutes taxes comprises), you should be aware that you will need to pay the agent’s fee on top of the purchase price.
Most agents in France will generally charge between five and ten percent of the purchase price for their services. It is important to remember that this is usually in addition to the notaire’s fee.
If you are flexible on exactly where in France your new home will be, hiring the services of a buyer’s agent may be a cost-effective move. A professional buyer’s agent will scour the country in search of properties that meet your criteria, which will help you to find real value for money in the market.
The vast majority of property purchases in France require that a 10% deposit is paid at the time of signing the preliminary contract. If you are buying a particularly expensive home, this may be reduced to five percent. It is advisable to request that this payment is made to the vendor’s notaire – and held in escrow until the end of the cooling-off period (usually seven days). If you must hand over a deposit to an agent, you should ensure that it will be held in an account specifically designed for holding deposits – a ‘compte séquestre’. If you change your mind about the purchase within the cooling-off period, your deposit must be returned to you in full within 21 days.
Although you may now have a rough idea of what your finances can stretch to in France, even the slightest shift in the value of the Euro in comparison with your home currency can translate to a significant difference in the price you pay for the property. It is definitely a good idea to employ the services of a currency exchange provider in order to set a rate in advance.
Spectrum International Mortgages has partnered with Smart Currency Exchange. They will be able to advise you on any foreign exchange matters at advantageous rates. They are generally more cost effective than the bank, with a saving ranging anything from 1-3%. They will work closely with you on the timing and utilise forward contracts to secure an exchange rate for your future completion date.
Posted by Spectrum French Mortgages in Get a Low rate French mortgage, Low rate French mortgage, mortgages in france
“We are planning to move to France this year and would like to buy a house. We are currently salaried but will set up our business once in France and thus become self-employed. Should we wait and apply as French residents once our business is set up in France, or apply for the mortgage now from overseas?”
Our advice would be to apply for a mortgage as a non-resident now, rather than as a new French resident and self-employed.
Although interest rates are slightly lower for French residents, your French business will be too recent for the bank to be able to lend right away. In fact, you would need to wait until you can provide at least 3 years of accounts/tax returns before applying for a mortgage…
However, as a salaried non-resident, the bank will simply check that you are not currently in a probation period and that your contract is permanent. Together we will do the necessary calculations to determine the maximum mortgage amount based on your current income and charges.
“We are planning to move to France once our house is sold here, and we will use the cash received to make the purchase in France. We might need a small mortgage for part of the purchase or for any eventual works to be done on the property. Can you help?”
With the sale of your current home, the bank will view your move as permanent. Unless you have a new salaried employment contract planned for your arrival in France (or a transfer of your position), they will be reluctant to lend any amount of money. Obtaining a mortgage, even if the amount is small, will thus not be possible…
We would advise in this case that we assess your situation as of today, taking into account your current savings, income and charges. Together we will check your borrowing capacity.
With historically low interest rates, providing you can afford a new mortgage, it makes sense to borrow towards the purchase rather than invest your cash.
Whether you choose to apply for a mortgage in France or not, avoid being in the uncomfortable position of not having sufficient funds to complete your project once you have found your dream house, and speak to us today to make sure you have considered all options!
Posted by Spectrum French Mortgages in Get a Low rate French mortgage, mortgages in france
Our tax guides are written by our advisers who both live and work in the relevant country.
They highlight key tax issues affecting expatriates moving to or living in France.
The guides will help you understand the local tax residency rules and local taxes on income, inheritances, investments, property and pensions.
Our local advisers work closely with professional tax advisers and accountants in each country and it is always recommended to seek professional tax advice.
Posted by Spectrum French Mortgages in mortgages in france, Tax in France
Spectrum International Mortgages at
The French Property Exhibition,
Olympia London, 15th – 16th September 2018
Spectrum International Mortgages is pleased to be exhibiting at The French Property Exhibition on the 15th and 16th September. Established over 25 years ago, this event is a ‘must attend’ for anyone who is serious about buying a property in France and is one of the UK’s most popular and long-running overseas property shows.
The show is the perfect opportunity to find out more about buying your dream home, with experts on hand to offer practical advice on a range of issues, from mortgage, tax, legal and investment matters, to guidance on wills, estate planning, pensions, currency transfers and more.
We are located at Stand 30, where our independent advisers and specialist mortgage representatives, all of whom live and work in France, will be available to answer questions and outline how we can help.
Event details are published on-line in advance of the show, giving you time to plan your day and ensure you get the most out of your visit. All sessions are free to attend, with tickets available on a first come, first served basis.
All visitors receive a complimentary copy of French Property News on arrival and a free show guide. Register for free fast-track entry now!
To book FREE tickets to the 2018 Olympia London event on the 15th & 16th September 2018, please click here.
We look forward to meeting you at stand 30.
Posted by Spectrum French Mortgages in mortgages in france
At Spectrum International Mortgages, we always have clients asking us questions. Recently the subject of inflation in a mortgage context has been coming up a lot.
Inflation, I have observed, has mostly negative connotations, and for savers this is for a good reason. If we look on Wikipedia, the definition of inflation is the following:
“In economics, inflation is a sustained increase in the price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money”
So, how does that translate if you are interested in purchasing a property and setting up a mortgage?
Well, if a person buys a house with a €100,000 mortgage, the original loan amount will lose value over time in terms of purchasing power. That €100,000 will not have the same worth in the future.
Using a future inflation calculator, we can get an idea of what that original mortgage balance will actually be worth in purchasing power in 10 or 15 years. Assuming a 3% annual inflation rate, the €100,000 loan balance would only be worth about €74,000 in 10 years; in 15 years, it drops to about €64,000. This means your loan balance will not cost you as much in future Euros.
Therefore, if you still have most of that mortgage balance a decade from now, it will not be as much of a financial burden. After all, as time erodes the value of money, what is left of the €100,000 debt will not have the same value it once did.
In other words, paying it off in the future will be easier. In addition, as inflation rises, so too should salaries (in theory), so if you are making more money and Euros are worth less, that €100,000 balance will be easier to deal with. With more money in your pocket, and a fixed mortgage payment that has not changed for a decade or longer, you will be looking at even more affordable monthly payments.
For example, a €1,000 monthly mortgage payment 10 years from now will only cost about €750 in real terms, taking into account the value of money.
This is why trying to pay off your mortgage early and as quickly as possible may not be as attractive as you think it is. It could actually make much better sense to put the available money into an investment, for example, to fund your retirement.
The prospect of inflation does not necessarily mean you should be planning on having mortgages forever, but with mortgage rates currently very low and inflation as a factor to take into account, it can be a smart move to think twice before you pay it off entirely instead of doing something more constructive with the money.
Note that this scenario is assuming a fixed rate mortgage, so you lock in at the current low rates. As inflation increases, interest rates will rise to combat it, meaning higher rates on variable rate mortgages (and all other types of loans). Therefore, depending on the timeframe of your project and your risk profile, securing a fixed rate mortgage today could be a wise move.
Should you have any queries on the subject discussed in this article, please feel free to contact us at any time.
By Bérangère Chabenat at Spectrum International Mortgages in France
Posted by Spectrum French Mortgages in mortgages in france
