20 February 2018 - French Mortgage News | International Mortgage News | Partners News |
When is one ever enough? Save money the second time around and take advantage of low French mortgage rates.
In the first two months of 2018 we have had a record number of you contacting us in relation to purchasing another French alpine retreat, rural cottage in the Dordogne or Cote D’Azur apartment.With French Mortgage rates as low as 1.5% for non-residents, buying another French property becomes a viable option for many of our clients.
Why buy again?
For some, the need for a second overseas property is purely a space issue: either as their family grows or so they can invite more friends. For others, the holidays just aren’t enough any longer and they now want to move over to France permanently. Rather than sell their existing holiday home, they are keeping that to rent out and buying another main property to live in. The French holiday rental market is still generating a lucrative income; one of our clients can’t squeeze in their own holidays as their first French property is so popular with visitors! So, they’ve just bought a second one that they can use. In a variation of this, another of our clients has been so pleased with the rental yield (it is more than covering the mortgage, management costs and upkeep) that they are now buying a second one to invest their annual bonus. We’ve even got one client who is buying their neighbouring property purely to ensure that no-one can develop it and affect the view they enjoy from their holiday home! In fact, there is a definite trend amongst our clients of buying their second holiday home in the same town as their first – they know the surroundings, they have the gardener’s details, the local plumber is on speed dial and they’ve seen the number of tourists first-hand.
Two birds, one stone
As well as taking out a second mortgage, many clients are using the low French mortgage rates to refinance the loan on their existing property. Unlike the UK, re-mortgaging in France is rare, mainly because it is expensive (approx. 5% of the loan amount). It is classed as a new mortgage, so you need to involve a notaire and they do not come cheap. However, for those of you on a rate of 3% or above, and with more than 10 years left before the term expires, the maths may well work in your favour. Plus, for the first time since the 2007 financial crisis, it is now possible to refinance and remain on an interest-only product.
Facts and figures
To illustrate the savings, we’ve pulled the numbers from a transaction that we recently arranged, where we refinanced a client’s existing mortgage as well as obtaining a mortgage for the new purchase. Their previous mortgage was a variable tracker product at 3% above the base rate, capped at 4.8% until 2024, with 22 years remaining. As our client wanted to reduce the length of the term, we obtained a rate of 1.95% fixed for 15 years. Which meant they had a rate fixed for the life of the loan at a lower margin than their previous product.
How much did we save them?
If their monthly repayments remain unchanged for the next 22 years (which would mean the base rate must remain at -0.30% for 22 years) the saving after the refinancing costs is €27,000. If the base rate moves to 1% after 5 years and stays at that level for the remaining term, the savings increases to €73,000 and if it the base rate moves to 2% after 6 years, the saving increases to €84,000!
If you are looking to buy another French property then it is worth considering re-financing at the same time – the paperwork required for both transactions is the same. Please request a quote here (Please assume that due to data protection laws we will no longer have your financial details on our files).
When requesting a re-mortgage quote, please try to obtain the following details about your current mortgage product:
- The bank you are with
- The rate you are on (and whether it’s fixed or variable)
- Is your loan on an interest-only or repayment product
- The term (or length) left on the mortgage
- The amount left to pay
All this information ought to be on your last annual mortgage statement. It is essential to let us know if you have been late or missed a payment as this will impact your ability to refinance.
If you are just looking to purchase another property and would like to understand what products are available, please do contact us here
Good to know
You may also want us to have a look at your existing life insurance policy. To take out a French mortgage in most circumstances the banks insist that you have life insurance. If you have recently moved over to France, you need to check that your existing policy is still valid as many explicitly exclude this. IPF has launched an Insurance Brokerage, fully regulated by the FCA. Please contact one of our advisors here to request a quote.
Lastly, if any of you are thinking of repaying your mortgage this year don’t forget to register with our trusted currency exchange partner, World First, to make your sterling go further. They provide all IPF clients with competitive rates when transferring funds over to France. Register with them and you will be contacted shortly by our dedicated representative, to discuss how they can help you to save money on your currency exchange.
Found a property? Request a quote now or call +44 (0)207 484 4600