So you’ve decided that
2010 is the year you’re
going to purchase your
property in France, you’ve
been browsing the internet
for French property and,
with the spring buying season
just around the corner, you’re
thinking about arranging
a viewing trip in the next
few months.
When you find that dream
property, you want to make
sure that you are in a position
to complete the purchase
within your preferred
timeframe. With that in mind,
we’re going to look at the
options available for financing
the purchase and the possible
delays involved in completing
the transaction.
When looking at financing a
purchase, there are essentially
four options open to you:
1) Purchase the French
property using sterling
assets or cash that
you have in the
bank.
2) Raise the money
using a mortgage on
a property you own
in the UK.
3) Use a French
mortgage to finance
the purchase.
4) Purchase the
property in cash and use a
post-finance mortgage to
recoup the funds.
Cash or equity release
The timescales involved vary
considerably, so we’ll have a
look at each one in a bit more
detail. Using existing assets or
cash you already have in the
bank is undoubtedly the most
straightforward and hassle-free
way of completing a property
purchase in France. Having
said that, we also appreciate
that not everyone has the sum
of cash available to buy their
dream home outright!
The only time constraints
relating to this approach are
the time it takes to draw up the
sales contract, and agreeing an
early completion date with the
notaire and vendor. As a
general rule, the completion
date will be set for three
months from the day the
compromis de vente (first sales
contract) is signed. If you are
taking independent legal
advice, there may be further
delays while the relevant legal
checks are completed.
If you are considering
purchasing your French
property with cash, a more
common option is to raise funds
by taking out an equity release
mortgage against your primary
residence. While this is
currently more complicated to
arrange in the UK than it has
been over the past 10 years, it
is still possible.
If you are considering this
option, you should give
yourself between four and six
weeks to raise the money on
your UK property. You may also
want to consider how you will
transfer your funds across to
France to complete the
purchase. Using your high
street bank may seem the most
obvious option, but there may
be significant savings to make
if you use a specialist foreign
currency broker.
Once the money has been
raised on your UK property, the
timeframes involved in
completing the purchase
should be the same as those for
completing a cash purchase.
French mortgages
As for raising money in France
itself, the French mortgage
market caters for both those
looking to move to the country
permanently, or those acquiring
a holiday home. Although
arranging finance in France
has its own idiosyncrasies,
British borrowers will find the
process similar to that in the
UK except, of course, for the
language and how the lenders
assess afordability.
Once all the relevant
supporting documentation has
been submitted in support of
an application, the
underwriters will usually
produce an agreement in
principle within two weeks.
Mortgage offers can only be
issued on receipt of a signed
sales contract, and the
borrower is then obliged to
leave an 11-day cooling-off
period before accepting the
proposed loan. While this may
seem like a quirky rule, it is
actually a law set by the French
government to give you the
opportunity to consider
whether or not you would like
to proceed with the mortgage.
Accounting for all possible
delays, the process therefore
typically takes between six and
eight weeks. Taking out a
French mortgage will provide
you with additional peace of
mind, as lenders will ensure that all necessary
legal checks are
carried out on the
asset, in addition to
carrying out a
survey on the
property itself.
To simplify the
daunting task of
raising finance in
France, it is worth
considering the
services of a
specialist French mortgage
broker. In many cases a broker
will know dedicated
underwriters within the banks
that should speed up the
mortgage application process.
The broker will be able to
highlight your case as a
priority and, if time is tight,
ensure it is dealt with as
swiftly as possible.
Post-finance mortages
As we have already
highlighted, one of the most
attractive features of a cash
purchase is the speed with
which the transaction can be
completed. If this is the reason
that you have chosen this
route, you may be interested to
know that it is possible to
arrange a ‘post-finance’
mortgage after you have
completed the purchase.
Typically, the lowest interest
rates in France are available for
mortgages that are being taken
out when the property is being
purchased. If you purchased in
cash and then decide to raise
equity against your mortgage a
few years down the line, the
interest rates and margin (the
rate over the Euribor base rate
that the lender charges)
applied will be higher than for
a straight purchase mortgage.
The reason the rates are higher
is that the French lenders
perceive these types of
mortgages to be of higher risk.
This is one of the reasons why
making sure you have the right
mortgage in place from the
start is so important in the
French market.
However, in France many of
the lenders offer post-finance
mortgages where borrowers
can take advantage of
purchase mortgage rates for
between six and 12 months
after the completion of the
property sale. The timeframes
involved in arranging a postfinance
French mortgage are
exactly the same as for a
normal French mortgage.
The most important thing
to remember is that the
mortgage application needs
to be under way before the
six- or 12-month anniversary
of the completion of the
original purchase.
As we have outlined here,
there are a number of different
options available when looking
at how best to finance a property
purchase in France. As long as
you are aware of the options
available and, more importantly,
the time-frames involved at each
stage, you can ensure that you
complete your purchase in your
required timeframe with the
minimum of hassle.
Tel: +44 (0)207 484 4600 | Email: info@internationalprivatefinance.com | www.internationalprivatefinance.com
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