Monday, 17 November 2008
Slightly Better
Slightly better for those with £'s in their pockets.
Sunday, 16 November 2008
The Exchange Rate
I started logging the exchange rate every day at the begining of April just gone.
Then £1 would have converted into 1.256 Euros.
Today the same £1 would be worth only 1.17167 Euros.
Thursday, 11 September 2008
A New Script - A Mortgage in France
The costs involved
1. Mortgage deposit
2. Bank arrangement fee
3. Notaire fees
Mortgage deposit: The maximum mortgage and minimum amount of deposit required depends on a persons nationality, their country of residence and where their income tax is paid.
For tax payers in France it is possible to arrange a 100% mortgage.
For UK and EU residents and tax payers the minimum amount of deposit is 15% of the purchase price (an 85% mortgage).
For residents and tax payers in non-EU countries, the minimum amount of deposit is 20% of the purchase price (an 80% mortgage).
Bank arrangement fee: All of the French banks and mortgage providers charge arrangement fees. Most charge 1% of the amount of the mortgage, many with a ceiling limit of €1,500, but it is advisable to check because they do differ from each other and some do not have a ceiling limit at all, a buyer may end up paying 1% of the total mortgage.
Notaire/Legal fees: For an existing property, be prepared for 8% of the purchase price as the cost for the legal fees. For a new build property, assume 5% of the purchase price. In addition to the Notaire fees, there will be the land/property registration fee which varies from region to region.
Working out a price range
If a mortgage is needed to buy a property, a buyer should first establish just what price range they should be looking at and whether they have enough cash funds for the deposit and legal fees and that their income is sufficient to afford the monthly cost of the French mortgage.
There are very strict rules which are imposed by the Banque de France on all the French banks and mortgage providers. These rules govern the amount a person can spend each month on a mortgage and ensure they can afford their mortgage.
Only one third of a person's monthly income may be used to service any existing mortgage or rent, other loans, credit card repayments (if the outstanding balance is not cleared every month), and maintenance payments (if applicable). What is left from that third of monthly income can be used to service the French mortgage and the cost of life assurance to cover the mortgage. For this calculation Capital & Interest Repayment figures are used which ensures affordability.
Professional advice, either from a mortgage broker, mortgage adviser, from a bank or an immobilier/estate agent should be sought about the basic lending criteria and the various options and mortgage products available.
There are only three essential elements for qualifying for a mortgage
1. Sufficient income to service the mortgage
2. Life assurance to cover the terms of the mortgage
3. Acceptability and valuation of the property
Sufficient Income: One third of monthly income to service the monthly cost of all loans and financial commitments.
For this calculation use gross monthly income - in other words do not deduct income tax.
For people in the French tax system, deduct social charges, but do not deduct tax.
Income from tax declared earnings, pensions and maintenance payments are classed as standard, but income from investments has to be generated from recognised and acceptable income investment products, or portfolios.
Rental income from long term tenancy agreements can be taken into consideration, but usually only up to 80 percent of the monthly rental income received. Income earned from holiday lettings is not considered as a guaranteed income and is not classed as regular income, except in some cases when there is an historical track record of a holiday letting business (such as gîtes and chambre d'hôtes self-catering holiday accommodation and Bed & Breakfast businesses).
Life Assurance: It is a requirement that all mortgages in France are covered by life assurance. Many of the French lenders insist that their own in-house policies are used and that it covers all the terms of your mortgage. Some lenders have different policies and insist that full disability cover is included as well as life cover.
Life assurance policies are medically underwritten and with a good medical record the premiums will be at standard rates. If the medical history is not good, then the premiums may be rated higher. There could be further problem if the premium is increased to a level where the cost of the mortgage and the life cover exceed the third of income ruling.
The Property: The bank will authorise a valuation of the property (usually at no cost to the purchaser). It is only a valuation to ensure that the purchase price of the property is not over priced.
The property has to be acceptable to the bank and built for human habitation. Barns for agricultural use or sheltering animals are generally regarded as unsuitable for mortgage finance as are wooden chalets and stone cabanons.
Finding the property and signing the Compromis de vente
Properties for sale can be found in many different ways such as immobilier or estate agent windows, magazines, property websites and notaires offices.
When you have found your property and your offer has been accepted by the vendor, you will be expected to sign a Compromis de vente (the sales agreement) and pay a reservation deposit which is usually 10% of the purchase price.
IT IS IMPORTANT that the Compromis de vente contains a Clause Suspensive (a get out clause) stating you are buying the property with mortgage finance and that your agreement to buy the property rests with being offered mortgage finance. Should you be declined mortgage finance you will not forfeit your 10% reservation deposit to the vendor.
When you sign the Compromis de vente you have a 7 day waiting period in which you can change your mind about buying the property without incurring any cost. There will be a specified number of days by which time you should have your mortgage offer. This will normally be 45 days but can be as little as 30 days.
The Mortgage Procedure
Under French law, all mortgages are "full status" and a lot of documentation is required to support a mortgage application.
Lenders are obliged to ensure that any person applying for a mortgage is financially able to meet the mortgage repayments.
Apart from a completed mortgage application form, life assurance form and a copy of the Compromis that has been signed by both the buyer and the vendor, photocopies of the following are required:
Identity - birth certificate, passport, marriage certificate and divorce certificate if applicable
Employed or receiving a pension - 3 months payslips, pension payment receipts or tax returns, proof of any other income
Self-employed or director of your own company – at least 2 years trading accounts and tax returns
Banks statements - (3 months) showing receipt of income and payment of loans.
Proof of Deposit - Statement proving funds for the deposit to the mortgage
Existing Loans - Statements (1month) relating to existing mortgage(s), loans and credit cards and maintenance agreement if applicable
Rental agreement (if living in rented accommodation)
A statement of assets
When buying a "new build" or wanting to include the costs of works /renovation in a mortgage further documents are required:
For renovation or improvement works - professional estimates or invoices from tradesmen registered in France together with a copy of their insurance certificate
For property to be built - the property title or preliminary sales agreement for the land, building licence, the building contract and plans
For re-finance or equity release - the title deed or loan deed with the complete repayment table
Life assurance is mandatory to cover all the terms of a mortgage. Most banks and lenders insist that their own in house policies are used and the medical underwriters may ask for medical examinations or tests.
When a file has been thoroughly checked and approved by an underwriter, the lender will request a valuation of the property. The valuation is not a survey. It is merely a valuation agreeing that the price being paid for the property and the amount the lender is prepared to lend is acceptable.
Should mortgage funds be declined, either because of financial information, medical underwriting or the unsuitability of the property, the lender will issue a letter which can be used as proof to have a deposit refunded as agreed in the Compromis let out clause.
Subject to everything about a mortgage application being acceptable, a mortgage offer (offer preable du credit) will be issued.
The rules about signing and dating a mortgage offer are very strict. There is a 10 day cooling off period. This is a legal requirement and allows a buyer sufficient time to consider the terms of the mortgage before returning the documents to the lender by post.
Some lenders will want their arrangement fee paid on acceptance of their mortgage offer and the life assurance policy will by put on risk from the date the mortgage offer is signed.
Sign and date the offer letter after waiting 10 days but before 30 days have elapsed. If the date is wrong, a new offer letter will have to be issued with another waiting period of 10 days.
When the lender sends the mortgage offer they also inform the buyer's notaire of the details of the mortgage. Completion date should be concluded within 4 months of receipt of a buyer's acceptance to the mortgage offer.
Mortgage Products and their Uses
In France, mortgages have in the main been used to purchase property or to fund improvement works.
A mortgage can be used to:
Purchase a property which may or may not need renovation or improvement works
Purchase a new property or one under construction
Bridging finance - only available when selling a property in France to buy another French property and only if supported by a new mortgage
Re-finance an existing mortgage on a French property and would like to reduce monthly payments and/or benefit from lower interest rates
Replace a loan in another currency that you used to purchase a French property and now would like to pay it back and take out a new loan in euros
Release equity from a French property
Choosing the right type of mortgage is essential.
Capital & interest repayment mortgage (variable rate)
Probably the most flexible of mortgage products. You know what your repayments will be. The interest rate applicable to a loan is revised on a regular basis. Should interest rates fluctuate, repayments stay the same - only the term of your loan is effected. A rise in the interest rate will increase the term of a mortgage. A fall in the rate of interest will reduce the duration of the loan. There is a maximum of five additional years that can be applied to a mortgage. You are able to make lump sum payments or redeem a mortgage early without incurring any financial charges or penalties and you can change to a fixed rate at any time. However, if you do convert to a fixed rate you will have to pay a charge in the event of early redemption.
Capital & interest repayment mortgage (fixed rate)
The repayments can be fixed for either a short period of the mortgage or for the whole term. Whilst you are in the fixed rate period you know exactly what you will be paying each month and how many payments will have to be made. Fixed rates are usually higher than variable rates. Financial penalties can be charged for redeeming a mortgage early, or even changing to a variable interest rate. Each bank and mortgage provider will differ and it is advisable to check exactly what their financial penalties are.
Interest only
The majority of interest only mortgages that are offered by the French banks are quite different and work differently; there are two products. With both products, the term of the mortgage is divided into two phases.
During the first phase only the interest on the mortgage is paid
During the second phase both the capital and the interest is paid
Because the capital is being repaid over a shorter period, during the second phase monthly repayments will be much higher.
The alternative product, a deposit is used as collateral which is estimated to grow at a set rate. Again the term of the mortgage is divided into two phases.
During the first phase only the interest on the mortgage is paid. At the end of the first phase collateral is valued and is deducted from the amount originally borrowed.
During the second phase the capital and interest on the outstanding mortgage is paid. Monthly repayments will be higher.
A pure interest only mortgage is possible, but not readily available to anyone as the lending criteria is very strict and the minimum lend is €100,000.
Equity Release Mortgage
Once virtually impossible, but with the increase in the number of international buyers, some banks have responded to the needs and requirements to those people who want to release some of the equity in their property. During 2005 and 2006 equity release mortgages were introduced and although many banks are choosing not to offer equity release, there is a growing number that are, and it is possible to release between 50% and 70% of the value of the property. The lending criteria is stricter than a straightforward mortgage to purchase a property, and there may be financial penalties attached with this mortgage. Each bank and mortgage provider will differ and it is advisable to check exactly what their financial penalties are.
Wednesday, 20 August 2008
A year gone by ...
Tony, the other half of mortgagefrance.com, had 5 operations between August and December last year, and during that time spent 8 days in intensive care. Hospital appointments are still continuing.
So maybe you'll understand why I've been quiet.
Well ......... it appears some of what I said in my previous posting, unfortunately, will have proven very true for some people.
The Credit Crunch - who's to blame ?
The banks ??? People being greedy ??? It's worldwide.
Currency exchange rates are causing a problem for some people too. Mind, that all depends on which currency is in your pocket and which currency you've got to change it into.
Most certainly the British Pound exchanged into Euros is not buying many Euros at the moment. The exchange rate is hovering around the 1.26% mark.
Thursday, 23 August 2007
Holiday Home Owners ....
The overseas holiday home market has seen many people purchasing their dream properties in countries all over the world.
Being so close, France has been, and still is, one of the top choices for holiday homes. The ferries and Channel Tunnel have made access easy, but the introduction of low cost airlines has made travelling to the more unspoilt parts of France an affordable reality. It is hardly surprising that thousands of holiday homes have been bought.
Figures show that in 2003, some 26,000 properties in France (not including Iles de France region) were bought by British or Irish buyers. Over 27,000 in 2004, whilst 2005 saw a small fall in numbers at 25,300, but 2006 saw the numbers rise to nearly 31,000.
How did these people buy their dream holiday homes?
Over the past four years the number of mortgages financed by French banks has risen, with many British and Irish people taking advantage of the lower interest rates, but even in 2006 French mortgages accounted for only 21% of those property transactions.
It is thought that approximately 50% of British buyers re-mortgaged their main home in UK to purchase their holiday home in France.
With the recent rises in UK interest rates, many people are now facing substantial increases in the cost of their monthly mortgage repayments, and the number of mortgages in arrears, or house re-possessions are on the increase.
At the end of June 2007, the number of mortgages in arrears had risen to an estimated 125,000, whilst the number of property re-possessions between January and June 2007 had risen to 14,000.
How many people have put their main home at risk by re-mortgaging their main home for the sake of buying a holiday home for cash, and what possible solutions are available to them?
One option would be to put the holiday home up for sale and hope for a quick sale, but that in itself can be a double edged sword.
According to a national group of French estate agents, property prices in France rose by an average of 2.8% in the first half of this year. However there are differences between the regions, and some regions are showing a fall in property prices.
For those people who may make a profit on the sale of their holiday home, there is the hazard of incurring the cost of Capital Gains Tax.
An alternative solution for some people, is the Euro Switch mortgage.
An Euro re-finance solution for those homeowners in France, who raised sterling mortgages on their UK property, giving them the advantage of benefiting from lower interest rates in the Euro zone, and also restoring the equity in their UK property. It is a way of using the French property as security and preserves their home country assets, matching liabilities and assets in the same currency.
Please contact me if you want to know more ....
Wednesday, 11 July 2007
Old or New ?
Some 30 or 40 years ago they didn't seem to mind damp crumbling houses with creaking wooden shutters and leaking rooves.
Today is a different story altogether.
In the main, foreign buyers and the French are interested in different types of property.
To us foreigners, a unique property in a beautiful location is the dream, whilst what the French really want is comfort, elegance and convenience. The great majority of foreigners prefer to buy an older property and are prepared to put up with a few defects and more maintenance costs.
An average type of new property is more expensive than an old one. It is therefore important to consider whether you will be able to re-coup the cost of renovating an old property in a remote area. Selling on may be difficult, but you may be lucky to find another foreigner who wants to buy it.
Let's look at the advantages of an old property .....
Rustic, unique, and charming, with perhaps craftsman made doors and windows.
Lots of land and established gardens.
Probability of better views than a new property.
Potential for letting out occasionally for holiday rentals.
Now for the new ....
The building is guaranteed for 10 years from construction.
You can design the house yourself.
The heating will be more efficient, plus there will be insulation.
The kitchen and bathrooms will be more modern.
The wiring and plumbing won't need replacing.
Parking facilities.
Will you be buying old or new ?
Tuesday, 10 July 2007
What Will You Buy ... And Where ?
Would you prefer an apartment, a house, a villa, a chalet or perhaps a chateau ?
Where will it be ? On the coast, in the countryside, in the mountains, or maybe in a bustling city ?
One thing is for definite - there's an awful lot of property to choose from.
The secret of a happy house purchase is to stick within your budget, choose the right location, and find a property that is as near perfect as possible for your requirements.
Beware of the days of summer when everything shimmers in the sunshine - the outdoor life may look good, but what about the winter months ? Even in the Cote d'Azur it can be very cold.
Wednesday, 27 June 2007
How Will You Buy ?
But, oh no it's not ...... Once money is put into property in France, it can be difficult, if not impossible, to get your hands on some of that capital ..... Think Very Carefully.
There are three possible answers.
1 If you are fortunate to have the cash available to purchase the property, that is by far the easiest way. But problems can arise later ......
2 If you are a home owner in a country other than France, it may be possible to re-mortgage your main home to raise the cash to buy your French dream home. Again not so difficult, except that you may be putting your main home at risk for the sake of your holiday home, and problems can arise later ......
3 The third solution is to apply for a mortgage with a French bank. Of the three options, this is probably the most daunting ......
Which French bank do you choose? Which bank provides the most suitable mortgage for your requirements? Which bank offers the lowest interest rates and charges? Which bank is the best for its standard or service and staff that speak and understand your language? Don't forget, we're dealing with French banks - you wouldn't expect a UK or American bank to speak French.
Buying a property in France with a mortgage from a French bank gives you more control of your future finances. Think before you buy for cash. Once you have completed on the purchase of your property, you may be closing the door to any future financial help.
Did you know that ......
Unlike many other countres, equity release on property in France was impossible until some 2 years ago, and there are still many banks choosing not to involve themselves with it. Those that will offer equity release have some very strict criteria and conditions. Many people find that they do not qualify for an equity release mortgage.
Income and age are the main problem areas, although self-employed people can find it difficult too, as can those who have bought through an SCI (a French company for buying property), and the list doesn't stop there.
It pays off to think carefully about how to buy ....
Friday, 22 June 2007
Please get our name right ....
Thursday, 21 June 2007
Step by Step Guide to buying a property in France
Buying property in France is quite different to buying in the UK or other countries and is regulated at each step of the transaction. We'll explain what happens and when .....
Your very first step should be to find out the amount you can borrow - it's a waste of time looking at property that is out of your price range and it will save you from disappointment as well.
We've made this easy for you. On our website http://www.mortgagefrance.com/ you will find the 'Initial Enquiry' form. From just a few questions we will be able to calculate the maximum mortgage you can afford, and we'll give you a guideline of the price range you should looking at.
A rule of thumb guide is to take a third of your monthly income. This amount should cover the monthly cost of your existing loans and financial commitments (if you are a tenant and paying rent, that is classed as a financial commitment).
The monthly cost of your French mortgage and the life assurance cover have also got to be included in the 33% of your monthly income.
* For French taxpayers, deduct your social charges from your monthly income.
* For other nationalities, you can use your gross monthly income (do not deduct tax)
Step 4. You'll be asked to sign the Compromis de vente - that's the sales agreement. You'll also be expected to pay a reservation deposit to secure your purchase of the property. You'll need to appoint your notaire as well (he's the French legal chap). If you wish you can use the same notaire as the person selling the property to you.
Step 5. Contact us, at mortgagefrance.com and we'll send you the necessary application forms you will need. You will need to supply other documents to support your mortgage application, such as proof of identity, payslips, tax returns, bank statements - we'll send you the list as well.
Step 6. Complete the mortgage application forms, gather together all the supporting documents and send the whole package to mortgagefrance.com. We will check your file and submit it to the bank for underwriting.
Step 7. The bank will underwrite your file, then the property will be valued, and after your life assurance application has been accepted, your mortgage offer will be issued.
Step 8. When you receive your offer letter you must wait at least 10 days, but no more than 30 days before signing and dating it, accepting the mortgage offer and returning it to the bank. When you sign the offer, you are committed to the purchase, and the life assurance cover will commence from that date. The bank will send the details of your mortgage offer to your notaire who will then prepare a deed of sale for your signature.
Step 9. Arrange for buildings/property insurance to take effect from the day of completion.
Instruct the notaire to request the release of mortgage funds, and make an appointment for the completion date.
Step 10. Completion day at last. Sign the relevant documentation with your notaire and the vendors. You are now the proud owner of your French property.
Congratulations !!
Wednesday, 20 June 2007
The French Mortgage Maze
Each bank has their own lending criteria and their own mortgage products.
Some require higher deposits than others.
Some limit the mortgage term to 15 years, whilst others will extend the mortgage term to 25 years.
All charge arrangement fees, but some have a ceiling limit on what they charge, and others have no ceiling limit at all.
That's just the start ......
Differences in interest rates will depend on the type of mortgage and the purpose of the mortgage.
A mortgage to purchase a property will have a lower interest rate than a re-finance or an equity release mortgage.
As I said - it's a maze.
Day by day, we will be building a comprehensive list of the reports, starting from the very basics, such as our 'Step by Step Guide to buying a property in France', showing you how the french banks calculate the maximum mortgage you can afford, the mortgages available, such as ...
- Capital and Interest (variable and fixed rate)
- Interest Only (In fine and pure interest only)
- EuroSwitch
- Post-financement
- Property improvements
- Re-finance and Equity Release
Plus .... we'll be explaining the whole mortgage procedure in detail.
But please ...... if you have any questions whatsoever, do ask them.
Or if you have any comments, let's hear them.
Meet Stan and Titchy
Sunday, 17 June 2007
Who would believe it is summer ?
Who are we ?
Well ....... We are mortgagefrance.com
Your English speaking mortgage broker living in the Gers in Midi Pyrenees, in the south west of France. We arrange mortgages with French banks for English speaking people wherever they live in the world, who want to buy a property somewhere in France.
France is a lovely country to live in, but things do not work the same way here as they do in other countries - French banks being a prime example.
We'll be writing about the mortgage procedure and bringing you up to date information of what is new in the French mortgage market. There is also a storeroom in which you will find articles we have written for press and radio, and we hope you will visit the links to our favourite websites.
It's also gives us the chance for us to share a part of our life in the Gers with you - maybe telling you of some of the nice things that happen and the not so nice things.
More importantly ... we're here to answer any questions you may have.
We hope you enjoy your visit.
And the good news is - it has just stopped raining and at last it's brightening up .....