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Ways to finance your
property
There are currently a number of ways of financing your purchase:
1) CASH: By far the simplest method, although you might want
to consider taking out a mortgage for tax purposes. A good
accountant will be able to advise you further and Overseas Properties
can introduce you to local professionals.
2) RE-MORTGAGING YOUR HOME LOCALLY: You will need to re-mortgage
your home with a local lender.
3) OBTAINING A FRENCH MORTGAGE: This method is good if you
do not wish to re-mortgage your home and are thinking of letting
out your property in your absence. The rental income you receive
will, of course, be in Euros, making it easier to calculate your
mortgage repayments. To obtain a French mortgage, you would need
to pay a deposit (usually 20%), with better rates available to those
putting down 30 or 40%.
4) COMBINING SOME OR ALL OF THE ABOVE METHODS: If you have
a cash deposit, or want to re-mortgage your home locally for a deposit,
and then obtain a French mortgage, that's fine too.
In France buying a property can only be purchased Freehold. Obviously
if we are talking about an apartment it would be share of the freehold,
which would be calculated according to the size of your property
as a percentage of the total floor area and grounds within the complex.
This figure would then denote the percentage that you would pay
towards the annual service charge for the maintenance of the building
and grounds.
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The price
Some properties are sold fully finished. This means that they come
complete with fully fitted kitchens including integral appliances,
fitted bathrooms, tiling to walls and floors and paint or other
specified finish to all other surfaces (according to the technical
specifications of the building). The price you are quoted is not
subject to any additional costs (unless you wanted to make changes
to the plans or specifications). Properties sold under the
Leaseback Scheme are sold fully fitted, equipped and furnished (see
Leaseback page).
Purchase costs
a) The French notary fees & stamp duty will be approximately
2-3% of the purchase price for new property, as opposed to 6-8%
for resales.
b) Local Solicitors/Notaires
Some clients choose to use a local solicitor in addition to the
French Notaire to help guide them through the purchase process.
Their role is purely to advise and inform as it is only the notaire
that can undertake the conveyancing. Fees vary depending on the
solicitor and the nature of his involvement.
c.) Mortgage fees
If a mortgage is raised on the property in France it would have
to be through a French bank, in which case there is a tax of approximately
2% of the mortgage amount. Funds raised on non-French properties
via mortgages from non-French banks will be treated as straight
cash payments.
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Local taxes and running
costs
a) Taxe foncière
The owner of the property is liable for this national tax.
b.) Taxe d’habitation
The occupier of the property is liable for this local tax. If the
property is leased for a long term then the tenant is regarded as
the occupier otherwise it is the owner.
c.) Service charges
The owner of the property is liable for the maintenance charges
relating to the building and grounds. Where the freehold is shared
as with apartments, costs are divided amongst the owners and calculated
according to the size of each property.
d.) Insurance & utility bills
The building insurance is included in the service charges. The occupier
of the property is liable for the contents insurance and the utility
bills (water, electricity, gas…). If the property is leased for
a long term then the tenant is regarded as the occupier otherwise
it is the owner.
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Renting your property
There are a number of options available:
a.) Private rentals (short term or long term)
This option requires time and personal involvement. Consideration
should be given to the how the property would be marketed, cleaned
and maintained as well as who would be responsible for handing over
the keys and checking the inventory.
b.) Rentals through a local agent (short term or long term)
This solution is far more realistic and very often chosen. The French
agents fees vary according to the work required by the client (research
of tenants, cleaning, inventories, linen supply …). As a guideline
an average fee for a full management for short term letting is in
the region of 20-30% of the gross rental income.
C.) Leaseback Scheme
Click here to leaseback page.
Which ever you choose the rental income has to be declared to the
French tax authorities. In most situations, the rental income is
not taxed as many charges can be offset (mortgage interests, local
taxes, service charges, managing agent fees).
Mortgage types
Fixed Rate Mortgage
The mortgage is fixed for the whole term so you will know exactly
how much you will have to pay and how many payments you will make.
There is usually an early redemption charge payable on fixed rate
mortgages. Also if you choose this option you may not be able to
convert it to a variable rate mortgage at a later date. Again this
may vary from lender to lender.
Variable Rate Mortgage
The mortgage is linked to the variations in the central bank lending
rate. However the monthly payments usually remain the same when
the rates change and the mortgage term will vary according to the
rates movement. Usually there is no redemption charge for early
repayment and you may be able to convert it to a fixed rate mortgage
at any time, but again this is dependent on the lender.
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Typical
property purchase steps with Overseas Properties
- Establish the amount of mortgage you can raise, the cost and
all the monthly payments
- Contact a financial adviser to discuss your mortgage in detail
and request a quotation
- Find your property
- Appointment of the notary
- Complete the mortgage application and life assurance forms
- The lender will issue you with a mortgage offer and the Life
Company will process your insurance application form
- The lender will send details of your mortgage offer to your
notary who will then prepare a deed of sale for your signature
- The release of funds will be made at the notaries request. Notary
fees are now due
- Sign the relevant documentation...
Congratulations,
You are now the owner of your French property.
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