20 November 2019 - French Mortgage News | International Mortgage News | Partners News |
Hot Tips for buying in the French Alps with a French Mortgage
Don’t get left out in the cold! Check out our hot tips for buying in the French Alps with a French Mortgage:
1. Take advantages of the benefits of buying with a French mortgage
Do consider purchasing with a mortgage! You can mitigate the FX, offset the loan amount against some French taxes and you can keep your hard-earned cash savings liquid. Meaning you can invest them in higher-return vehicles, instead of locking them into the property. Read more about the benefits of a French mortgage here.
2. French banks favour properties in the French Alps
The French banks recognise the popularity of the French Alps with both non-resident and residents alike. This means that they feel more confident lending to properties situated in all the Alpine departments. Which also means is a wider choice of lenders for borrowers
3. When buying off-plan, plan ahead
Watch out if you are buying off-plan (known as a VEFA) – the banks do not like to be over-exposed in any one development, so they will set a limit of the number units (chalets or apartments) they will loan against. Working with a French mortgage broker can increase your chances of securing a mortgage on a VEFA as they can search the whole market for you to find a lender that hasn’t reached their quota and can often reserve you a place directly with the underwriters, and in some instances even increase the bank’s stated quota.
4. Don’t get caught out by French Mortgage products that are too good to be true
It is possible to get 100% mortgages in the Alps, even as a non-resident (albeit the lender would want you to place a separate sum of money (in Euros) with them as collateral) and the rates can be lower with the regional lenders. If you are looking for a ‘dry’ loan (so no need to place other assets with the lender, then the highest LTV available is 85%. And take care when comparing rates and LTVs as these very low headline rates usually come with some ‘hidden extras’ such as a mandatory ‘assurance vie’ product that can add another 0.5% to the interest rate. Check out our article that explains these mandatory products in more detail.
5. Hybrid? Interest-only? Use a broker to find the most suitable French Mortgage product for your situation
If you are thinking of letting your new alpine property out on a seasonal basis, you might want to consider an interest-only mortgage, or even a hybrid product whereby the first 7 years can be on an interest-only basis and then you pay the remainder of the term on a capital repayment product. This keeps the monthly bills down in the beginning (especially useful if you are buying off-plan and the building is still under construction), and you can use the rental income to pay the mortgage (once the property is fully built). Check out some of our French Mortgage rates on offer here
6. Pick your ski resort carefully
If you’ve been to any of the popular resorts recently, and even some of the smaller ones on the outskirts, you will have noticed that many of them are heavily investing in infrastructure to extend the winter season and to create a summer one too. However, it’s also true that a number of these planned investments have been talked about for several years and have yet to see fruition. So, do your due diligence before selecting a resort based on any future promise of improvements.
7. Rent out your property and cover the monthly French mortgage payments
The concept of a buy-to-let mortgage (where you use the potential future rental income in your mortgage affordability equation) does not exist in France. You would need to be able to afford the mortgage payments without the rental income. However, if that is possible for you, then equally there are no restrictions in letting out the property once it’s yours.
All in all, the ultra-low French mortgage rates (starting at around 0.70% fixed for 15 years!) and the high rental yields available in the most popular resorts have meant that many of our clients have ended up making money on their new French property. By taking out the French mortgage, instead of buying cash they have invested their cash savings into high yielding investment vehicles and used the seasonal rental income to service the (often interest-only) monthly mortgage payments. The fact that they can keep the rental income and the mortgage payments in Euros, also minimises their exposure to the fluctuating exchange rate. It’s a win win!
To discuss your French property purchase (wherever in France it may be!) please get in touch by completing our request a quote form.
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