THE HOME RUN

De­spite the cur­rent fi­nan­cial un­cer­tainty, there are many rea­sons why now is a good time to buy a home in France with a French mort­gage, says Si­mon Small­wood

Living France - - CONTENTS -

Cover story Our ex­pert ex­plains the ben­e­fits of buy­ing a prop­erty with a French mort­gage

It is fair to say that 2016 was a mo­men­tous year. A num­ber of un­ex­pected events had the ef­fect of plung­ing many areas of our lives into un­cer­tainty. Those of you look­ing to pur­chase a prop­erty in France would have felt this par­tic­u­larly keenly, as in­ci­dents such as the EU ref­er­en­dum re­sult and the ter­ror­ist at­tacks in Nice put a dif­fer­ent com­plex­ion on the prospect of own­ing a prop­erty on the other side of the Chan­nel.

How­ever, for a good many peo­ple, these events also high­lighted the im­por­tance of en­sur­ing those long-held dreams of own­ing a sec­ond home in France are not de­railed by ex­ter­nal forces.

With 2017 now un­der­way, it is time to look to the fu­ture. The press and politi­cians can con­tinue to de­bate Brexit un­til the cows come home, but it is im­por­tant not to let this dis­tract you from your plans of own­ing a prop­erty in France. The cur­rent con­jec­ture over Bri­tain’s exit from the Euro­pean Union is no rea­son to aban­don what, for many of you, will be a life­long dream.

KEEP­ING PERSPECTIVE

At times such as this, it is im­por­tant to keep a sense of perspective. It may seem ob­vi­ous, but the beau­ti­ful coun­try of France has not be­come any less at­trac­tive as a re­sult of the EU ref­er­en­dum. It still of­fers glorious land­scapes, a won­der­ful culi­nary tra­di­tion and ex­cel­lent qual­ity of life. There is no rea­son why you should give up on the as­pi­ra­tion of own­ing your own lit­tle piece of this fan­tas­tic coun­try. What’s more, the pres­ence of Bri­tish buy­ers is of the ut­most im­por­tance to the prop­erty mar­ket in France. This is not an area of busi­ness that the French will want to turn their back on any­time soon.

The French mort­gage mar­ket is a good ex­am­ple of this. French banks lend mil­lions of eu­ros ev­ery year to Bri­tish buy­ers, and they are de­ter­mined not to al­low the Brexit process to close this mar­ket off. In­deed, some of the in­ter­na­tional lend­ing di­vi­sions of French banks went as far as to lower their rates in the last year, in or­der to stim­u­late busi­ness from Bri­tish buy­ers that they fear may be ebbing away in the af­ter­math of the ref­er­en­dum.

LOW MORT­GAGE RATES

As al­ways in times of un­cer­tainty, buy­ers can also use a French mort­gage to pro­vide an ex­tra level of se­cu­rity when mak­ing their prop­erty pur­chase. Those re­cent cuts have meant that French mort­gage rates are at or are near his­tor­i­cally low lev­els. It is there­fore a great time to se­cure mort­gage fi­nanc­ing in France.

As a Bri­tish buyer tak­ing out a mort­gage in France, you are re­duc­ing your ini­tial ster­ling out­lay on the pur­chase. Given that the pound has weak­ened against the euro since the ref­er­en­dum re­sult, this pro­tects you from need­ing to trans­fer too much of your sav­ings into eu­ros at the cur­rent, un­favourable rates. For an ex­tra layer of pro­tec­tion, you could also con­sider a fixed-rate French mort­gage. The rates for these mort­gage prod­ucts have dropped to ex­tremely ap­peal­ing lev­els. For ex­am­ple, at the time of writ­ing it is pos­si­ble to se­cure a fixed rate of 1.85% over 20 years. What­ever comes to pass over the com­ing years, you are thereby guar­an­tee­ing that you will con­tinue to pay off your mort­gage at an his­tor­i­cally com­pet­i­tive rate of in­ter­est.

REDEMPTION PENALTIES

One ben­e­fit of French mort­gage rates be­ing so low is the im­pact this has on redemption penalties for fixed-rate French mort­gages. Redemption penalties are typ­i­cally six months’

in­ter­est. There­fore with French mort­gage rates be­ing low, redemption penalties are also at his­toric lows.

Should you pre­fer prod­ucts with no redemption penalties, capped-rate prod­ucts have the ben­e­fit of pro­vid­ing pro­tec­tion should rates rise in the fu­ture while not hav­ing penalties for early re­pay­ment.

Many buy­ers cur­rently there­fore pre­fer to pur­chase with a French mort­gage as they wait for the pound to strengthen against the euro. As and when the pound re­cov­ers, a French mort­gage with no early redemption penalties will sub­se­quently al­low the Bri­tish bor­rower to pur­chase eu­ros at a more favourable rate and use them to pay off a chunk of the out­stand­ing cap­i­tal, re­duc­ing the ster­ling cost of com­plet­ing their French pur­chase. The at­trac­tively low in­ter­est rates cur­rently of­fered by French banks make this a par­tic­u­larly shrewd op­tion.

MORTAGE APPROVAL

A French mort­gage approval can also be used to send out the right sig­nals to ven­dors when pur­chas­ing in France. We can­not com­pletely dis­re­gard the fact that these are un­cer­tain times, and it is per­fectly un­der­stand­able that French prop­erty ven­dors can be more cau­tious about sell­ing to Bri­tish buy­ers.

One way to calm any fears that they may have is to se­cure a French mort­gage agree­ment in prin­ci­ple be­fore mak­ing an of­fer on their prop­erty. A fi­nan­cial preap­proval from a recog­nised French bank will serve to re­as­sure the ven­dor that you are se­ri­ous about the pur­chase. It will also demon­strate that you are in a sound enough fi­nan­cial po­si­tion to go through with the ac­qui­si­tion and pro­vide you with peace of mind about how much you can bor­row.

Se­cur­ing an agree­ment in prin­ci­ple can also cut down on the over­all time frames in­volved in com­plet­ing the French prop­erty pur­chase. In the cur­rent cli­mate any slight de­lay or hold-up in the sale can cause ven­dors to be­come twitchy. It should be un­der­lined at this stage that a prop­erty pur­chase in France takes on aver­age around three months to com­plete. How­ever, there is noth­ing worse for a ven­dor than this time frame be­ing ex­tended by de­lays as the buyer strug­gles to se­cure the ap­pro­pri­ate fi­nanc­ing from a bank.

As such, ob­tain­ing a fi­nan­cial pre-approval is a great way to re­as­sure the ven­dor that you are in a po­si­tion to com­plete the pur­chase in an ef­fi­cient, timely man­ner.

This is part of the process that can be com­pleted be­fore you even start your French prop­erty search. Not only will it make you a more re­li­able prospect to po­ten­tial ven­dors, but it will save valu­able time once you find that dream prop­erty.

Hope­fully the ideas we have shared with you here will help to put you in a strong po­si­tion if you are look­ing to buy your dream French home this year.

Si­mon Small­wood is joint man­ag­ing di­rec­tor of In­ter­na­tional Pri­vate Fi­nance in­ter­na­tion­al­pri­vate­fi­nance.com

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