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Financing Your Dream Home In France
By: Oliver Phillips
In Part 2 of this series, Oliver Phillips of PFS France (http://www.propertyforsalefrance.co.uk/)
takes a look at common approaches to financing french property purchases.
So you've found your perfect home, you know the area, the people, and you've
appointed your own Notary. You've also had an independent valuation and will be
getting the property surveyed to make sure you understand what you are buying?
Your next thought is likely to be financing? Generally, you might look to
finance your purchase in one of two ways; either using the equity in a UK
property by way of remortgage or by taking out a second mortgage on the French
property. Both methods are subject to exchange rate risk but in different ways.
If you decide to remortgage an existing UK property the finance would normally
be raised in £GBP. Raising the mortgage in euros may result in a fairly
substantial foreign currency conversion or exchange fee to pay. Make sure you
are aware of how much this will be. Secondly the timing of your purchase is
important. A weak pound against the euro will inflate the cost of your property,
and require you raise a larger mortgage, but conversely a strong pound against a
weak euro, could make remortgaging your UK home a cheap way to buy your home in
France. However once the mortgage is raised, you will always pay the same
monthly fee regardless of future exchange rate changes.
If you want a second mortgage on the French property itself it might be possible
to deal with a French branch of your British Bank and this is worth looking
into. A euro mortgage with a French bank will always be for the euro cost of the
property, so you avoid exchange rate risk on the mortgage amount, but monthly
repayments though the same in euros may seem more or less expensive as the euro
exchange rate moves against the pound.
French mortgages are not that different to UK mortgages; they are usually of the
repayment type with a term of between 5 and 20 years. As in the UK, fixed rate
and variable rate options exist and redemption penalties will sometimes apply. A
larger deposit will often secure a more attractive interest rate but the minimum
deposit is 20%. Arrangement fees of around 2% are also normal on French
mortgages.
French financial services legislation dictates that life insurance to cover the
mortgage is taken out and also that a mortgage offer once made, must be accepted
no earlier than 10 days and no later than 30 days after the offer has been made.
This article only provides a general appreciation of how French property can be
financed and it is not advice. Guidance should be sought from a specialist who
is qualified to advise on the best method of financing in your specific
circumstances.
Copyright 2005 Oliver Phillips. May be freely reproduced "as-is" for private and
commercial use.
About the Author:
Oliver Phillips works for PFS France (
www.propertyforsalefrance.co.uk/) a
business that helps French property owners advertise and sell, and potential
buyers find, some of the finest and best cared for traditional French properties
available. |
