18 July 2018 - French Mortgage News | International Mortgage News | Partners News |
Beat the crowds and the French mortgage rate rise and buy this summer
Every year Brits make over 6M tourist trips to France, and this summer is unlikely to be any different. In fact, this year France’s wooing of foreign travellers has been so successful, some key attractions are apparently struggling to cope with the influx of holiday makers!
The same can be said for estate agents! The summer holidays are their busiest times as many of us, charmed by the lifestyle, scenery, and weather (and perhaps the local wine), escape the gite for a day and head out with the agents on some viewing trips. Which means competition for the prime properties can start hotting up. Over the recent months we’ve shared a number of hints and tips for those of you thinking of purchasing a French home. We’ve highlighted the most frequently asked questions below, to make sure you stand the best chance of beating the crowds and securing your dream Brexit bolt-hole.
- How do I know what I can afford?
Firstly, when looking at French property prices, make sure you are clear whether the estate agent’s fees have been included (If they have you will see the letters NIA after the price). In France these are paid by the purchaser and will add around x% to the purchase price. Then also consider taking out a French Mortgage, rather than using your Sterling savings. It is virtually impossible to release equity from a French property you own, so buying with a French mortgage is a sensible option to ensure your hard-earned savings stay liquid, in case of a rainy day. A French mortgage will this help mitigate the exchange rate (see below), with rates as low as 2% (fixed for 20 years!), and could also increase your budget. Use our suite of French mortgage and property calculators and then get in touch for a quote
- I’ve seen my dream house, how do I know what to offer?
The old adage “a house is only worth what the next person will pay for it” is just as relevant in France as in the UK, in fact even more so. Typically, non-French buyers value the character and traditional features more highly, can prefer properties in need of renovation or those in located in more rural locations. As a non-resident, you need to be careful not to over-pay for these characteristics as, should you come to sell later on, you may find that the price you want may only appeal to other non-resident buyers. Click here for tips on how to secure the best price and making an offer
- What about Brexit?
Just as the French Government has signalled their intention to encourage British businesses to move over to France, the French banks have also set out their stall: Business as usual. Non-EU residents and citizens are able to obtain non-resident French mortgages and the French lenders have stated that they will continue to lend to UK nationals after the March 2019 deadline. For our latest report on the impact of Brexit on French mortgages and buying in France, read our article in the August edition of French Property News
- Is it worth waiting to see if the mortgage rates will fall?
In short, no. All our recent conversations with the French lenders have indicated that a gradual rate rise is imminent. For more detail read our article here and check out a selection of the French mortgage rates currently available here
- How can I mitigate any exchange rate fluctuations?
If only we had a crystal ball, we’d all be millionaires by now. Sadly however, the majority of us will have to use some more financial know-how to make sure that we protect our money. We’ve said it before, but it’s still worth re-iterating: French mortgage rates are still at historic lows, you are able to fix the rate for the lifetime of the loan and most products have only small or no early repayment fees. This means you can keep your cash savings in sterling, pay a low monthly euro payment and then re-pay the mortgage in full a few years down the line if the exchange rate recovers. This has the potential to save you tens of thousands of pounds which is the cost of a swimming pool or the new kitchen (See our article in the Sunday Times for more details). Likewise, make sure you talk to a foreign exchange provider like World First (Contact our dedicated account manager directly here for a quote) – they can give you their expert opinion on the exchange rate and ensure you get a much better rate than your local bank. You can also organise forward contracts that will give you more clarity on what the final price will be once you have transferred your deposit. All of this knowledge allows you to make a much more confident offer.
- Can I get an Approval in Principle? My agent says they won’t show me any properties unless I can prove my finances
We hear this every year around this time. At their busiest, estate agents can become more ‘choosy’ in who they show properties to, demanding to see ‘proof of funds’ before taking prospective buyers on viewing trips. An Approval in Principle (AIP) will ensure that you get your foot over the threshold as it is proof that the bank will lend you the money you require. It has many other benefits as it can be obtained way in advance of you finding a property, saving you time later on in the process and ultimately putting you in as favourable position as a cash buyer. But be warned, not all AIPs are true Approvals and if you do not obtain the right sort, you can be refused by a bank later on. Read more here on how we can ensure that does not happen to you.
- Can I rent the property out when I’m not there?
Yes! And it’s a great way to service the monthly mortgage payments and even pay for your holidays! Interest-only French mortgage products are available and many of our clients have bought their holiday homes in this way. It’s particularly popular option for those of you buying in the Alps but the economics work for properties based in any beloved French holiday destination. For example, a 4 bed gite in the Dordogne area can rent out for £1000/week. This beautiful 4 bed house in Montcaret is on the market for €561,800. Based on a 75% LTV and a 2.5% interest-only mortgage for 14 years, the monthly repayments would be €878. On a 50% LTV your annual mortgage payments would be €7,020; requiring you to only have to rent it out for 7 weeks in a year for it to pretty much pay for itself. Read more on how your second home could pay for itself and your holidays here
Do check out all the resources on our website, including our video channel, and regional guides that have lots of information on the French purchase process, how to obtain a French mortgage and then get in touch to obtain a personalised quote.
Found a property? Request a quote now or call +44 (0)207 484 4600