Whilst we are not out of the woods yet, the start of the vaccination program and talk of a reduced quarantine period does suggest that traveling to France in the first half of 2021 will be possible – and if pent up demand is anything like what we witnessed over the summer, the demand for French property from overseas buyers is going to go through the roof!
This may explain why the French banks have stopped automatically deducting 10% from their valuations – as they no longer believe that property prices are going to be negatively affected next year. In practical terms, this means that French mortgages with LTVs of 85%, (with no need to place other investments or purchase additional life insurance), are back on! This is great news for the financially savvy: the higher the LTV, the more you can borrow in Euros, and the less sterling you need to exchange into Euros for your deposit and personal contribution. Given the continued uncertainty over the Brexit talks and the impact that is having on the exchange rate, mitigating your exposure to currency fluctuations by borrowing in Euros, and reducing the amount of sterling you need to transfer is a definite benefit of purchasing with a French Mortgage, regardless of whether you can afford it outright in cash.
It is also true that the French banks are feeling much more confident in assessing the impact of COVID on an individual’s situation. They are still rightly cautious, (and they are still not accepting applications from those reliant on income from some key industries – such as aviation and hospitality) but if you can demonstrate that you have successfully kept up with your contractual obligations over the past year, your application will be considered and assessed pragmatically even when you may have experienced a temporary drop in income.
If are you planning to purchase in France next year we do have some important advice for you:
- There is going to be a huge pent-up demand as soon as travel to France is viable. Enquiries to agents are still high, but understandably people are not willing to commit until they can see the property in person. High demand, particularly in the sought-after areas of the French Alps and South of France, means you will need to act quickly to get your offer accepted – so speak to us now so that you are confident in your budget and mortgage options, and benefit from our fast-track mortgage application process and continued support all the way to completion (80% of our clients complete before the date in their sales contract)
- Consider using us to get an AIP in place now. It’s a fully underwritten Approval in Principle that is subject only to you finding the property. We’ve talked about the benefits of an AIP in more detail before, but in short, you will be in the same position as a cash buyer – as the seller and agent can be confident you are a financially-viable purchaser, and you can move just as quickly as one as your mortgage application has already been processed and underwritten. An AIP lasts for 3-6 months and can easily be refreshed, so apply with us now and get all the admin out of the way.
- The French banks are looking negatively at people who have elected to take payment holidays from their existing mortgages or loans. So, if you don’t need to take a payment holiday, we strongly advise you not to if you want to give your application the greatest chance of success. If you have taken a payment holiday, it’s not necessarily the end of the line. If you can show that you didn’t need to have taken it, (perhaps your business recovered quicker than you had anticipated), the banks will still consider an application – but do make sure you talk all this through with your broker before submitting anything to the banks. It’s important that these situations can be clearly presented, and the explanations can be clearly laid out to avoid a direct refusal.
- Watch that overdraft – the French banks do not like you using your overdraft, whether it’s an authorised one or not. So, do be careful over the festive period and ensure that you don’t accidentally go into the red, even for a matter of days.
- Use the time between Christmas and NY wisely – by making sure you understand the French purchase process and start to get your paperwork in order( e.g. your last 3 months payslips, and official bank statements as well as any annual mortgage or pension statements). The banks can be ‘tricky’ about accepting downloads from certain online accounts so if you don’t have paper copies it is worth requesting them now as they can often take a couple of weeks.
We are open over most of the Christmas and New year period (see here for details) so please do get in contact to discuss your plans for 2021 – we can’t stress enough that being prepared is going to be more important than ever to ensure you don’t lose out on that dream of owning in France.
Get in touch today so we can make 2021 the year when good things, like buying your own French home, happen!
Festive further reading: