Mortgage financing for your French Purchase
Non-resident mortgage specialist since 2003
Key items
Large loan amounts
For larger purchase sums (from about €1.5 million), there are banks that offer their services especially for this category of non-resident buyers. These are Private banks or special departments of regular French retail banks. Therefore, in addition to the annuity mortgage, the interest-only mortgage is also offered under certain conditions. The financing setup will be designed to be fiscally optimal.
An installment-free mortgage can be offered for wealthy clients who are willing to have part of their assets managed by a private bank specializing in this. For example, it is possible to borrow 100% interest-free, provided that 50% of the loan amount is placed with the bank as “Assets Under Management.
An integral part of the services provided by the banks serving this category of clients is to minimize Impôt sur la fortune immobilière (IFI). To this end, they advise on the overall design of financing and its administrative recording.
Financing without a bank
Alternatives to financing a French purchase project is to find one or more financiers outside of commercial banks. This could include friends or family or other wealthy “third parties” providing a loan. Crowdfunding (or peer-to-peer financing) platforms allow supply and demand to find each other for this type of financing. A specialized platform is being created for financing business plans and investment properties in France. Please leave your details here if you wish to be kept informed about the formal launch date; both as a prospective investor and applicants for funding are invited to leave their details.
If supplemental bank financing is required or if commercial banks do not offer a possibility then friends or family can step in with a loan or donation. Even then, it is possible to establish a mortgage guarantee with the French house as collateral.
Through a crowdfunding platform, financing can be arranged for entrepreneurs and real estate investors. Investors can thus diversify their investments and benefit from interesting returns. Are you looking for financing for your business or investment property in France or are you interested in investing in such projects with mortgage guarantee leave your details here. You will be informed of the formal launch of the platform specialized in this.
Funding rate
The maximum financing rate in France varies from bank to bank, region to region and project to project. As a non-resident buyer, up to 85% to 65% of the purchase price can currently be financed.
For residents of France, up to 100% to 90% can be financed. In doing so, there is a wide choice of sofas. Some regional banks may also finance aspiring residents of France as if they were already residents.
Hypotheek & Buitenland has many contacts in France with both nationally operating banks and regionally operating banks. So there is something to choose from.
There are currently no Dutch banks financing foreign houses.
The lower the loan rate the lower the risk to the bank and the sooner a bank will usually be willing to grant a mortgage loan. Keep in mind that it is not true that the lower the loan amount the easier it becomes to get a mortgage. For loan amounts under €100,000 or sometimes even €150,000, the banks are not keen.
If the equity comes into the purchase of another loan, that is a problem for some banks. People want to see their own money come from savings.
Non-residents are defined as buyers who are not yet (tax) residents of France at the time of purchase.
Testing on income
French banks also test whether your income is sufficient to obtain a mortgage. The method of testing varies from bank to bank. Banks generally allow up to 30%-39% of gross income to be spent on loan charges, rent and alimony. Some French banks place more value on residual income than loan percentage as an assessment standard. Some French banks still deduct Health Insurance Act contributions from income before testing.
Most French banks require that income from salary derives from permanent employment. Some French banks are less strict about this or do not actively check it. The Dutch phenomenon of the declaration of intent is not known in France.
It is possible to get a mortgage if the income comes from your own business. See further explanation on this under “entrepreneurs.”
French banks look at retirement income from a certain age. Exactly what age varies from bank to bank. Sometimes they then use a certain weighting percentage (“pondering”) of current income as future retirement income, sometimes they look at the actual pension to be received.
If the pension income has already started then French banks will test with that pension income provided it is a pension guaranteed for the duration of the mortgage applied for.
Most French banks include existing rental income as income. In doing so, it varies from bank to bank what percentage of it is taken as income. One does not look at the net rental income: so the existing mortgage expense of a leased property will be considered in its entirety in the review of the mortgage application.
If the feasibility of a case depends on future rental income, an application will usually not be approved.
If there is no or little regular income, but the income comes from assets, some French banks are willing to look at the size of the assets to assume a certain fixed income from them. This sometimes assumes a fixed rate of return, or – if the income is demonstrably “perpetual” – looks at actual returns achieved.
For households with gross annual incomes higher than €150,000, there are more mortgage options. Contact us about this for more information.
Existing spending patterns of their prospective clients are also tested by French banks. People like to see that there is a certain “savings capacity”; or in other words, that there is money left over to save each month.
In addition, more and more French banks are also testing the size of savings and how much savings remain after the purchase in France.
French banks do not include income from WAO or WIA as income. Income from private disability insurance is generally included as income.
Entrepreneurs
Even if the income comes from self-employment, it is possible to get a mortgage from a French bank. However, one is reluctant to include profits not distributed to private parties that have remained in the company. Some regional banks finance only clients with income from wages.
French banks are looking at profits for the past three years. At least 3 years of annual figures must be available and the company must exist for at least 3 calendar years. In addition to profits, they will look at sales trends and the equity position on the balance sheet.
The own B.V. must exist for at least 3 years and must have a healthy profit and sales development. The balance sheet should also look healthy with positive equity and an acceptable current account ratio with the owner. French banks count as income the salary and actual dividends paid. Sometimes banks are willing to consider potential dividend income as well.
If there is a multi-company structure, it is important to clearly identify the results and ownership relationships.
French banks do not want to give a mortgage to a foreign company.
Application process
There is only one chance to make a first impression at a bank: as far as we are concerned, it should be overwhelmingly good. After choosing a particular route toward realizing the desired mortgage loan (see also “preparation”), the application process begins. Five stages can be distinguished in the application process: 1. preliminary application 2. file, 3. submit, 4. monitoring and adjusting, 5. conclusion.
To verify that an application is indeed feasible – in principle – a preliminary application is often first submitted to the intended French bank.
A well-documented application is essential for a successful application. Unclear or gaps in documentation create the perception of additional risk on the part of the bank. Together, the documentation is completed to the point where all essential elements are substantiated.
Hypotheek & Buitenland creates a comprehensive cover letter explaining all the elements and translating them so that everything is 100% clear to the French bank. The application is completed with the bank’s application form after which it is submitted.
Once submitted, additional questions or requests for additional documents sometimes follow. Ambiguities are clarified and additional substantiation in the form of documents is provided. Where necessary, if the situation calls for it, the application will be adjusted. If an application is unexpectedly rejected, an attempt will be made to change the bank’s mind by means of an appel sur refus. Should that fail, discussions will follow to see if applying for a mortgage with another French bank is possible.
When the risk committee of the respective bank has given its approval and the appraisal also shows a sufficient value, the bank will make its credit offer. After observing the legally required reflection period(loi Scrivener), and verifying the mortgage terms, the offer can be accepted. If desired, a bank account in France will be opened and insurance arranged with the help of Mortgage & Abroad. Completion follows after the notary receives the draft mortgage deed from the bank and releases the mortgage funds into the French notary’s trust account.
Please allow 6-8 weeks processing time after the fully documented mortgage application is submitted. However, this is an average; some banks are smooth, some slow. Longer are the processing times for more complex mortgage applications such as when buying out a (former) partner(rachat de soulte), refinancing and financing new construction.
Usually an appraisal is required after the initial assessment has taken place. It varies from bank to bank who should organize this. Sometimes the bank does it at its expense, sometimes the bank asks the customer to provide an appraisal report.
Banks that do not often deal with non-resident clients (often regional banks), quite often request (sworn) translations of a number of documents, such as pay slips, tax assessments or other documents. The goal is to keep translations to a minimum.
Mortgage Types
France has a different financing culture than the Netherlands. French banks take a more classical approach, focusing on paying off the mortgage. Consequently, the annuity mortgage is by far the most widely used mortgage form. The no-repayment mortgage is hardly offered, if at all.
The annuity mortgage(prêtamortisable) is the most widely used form of mortgage in France. In the absence of mortgage interest deductions and a less sound pension system, the focus in France is on paying off the loan through this form of mortgage.
Redemption-free is currently available – under strict conditions – to non-residents at one French bank. These conditions boil down to demonstrating, as early as when applying for the mortgage, that there is more than enough (liquid) equity to repay the mortgage in the future. The maximum duration is 14 years.
French banks do not get excited about loan amounts below €100,000; in fact, they are not commercially interesting enough. Some banks even have a hard lower limit of €100,000 or €150,000.
French banks usually offer a fixed interest rate for the entire term. Sometimes a variable interest rate is also possible with or without built-in protection against rising interest rates such as an interest rate plan fund or the “accordion formula. A fixed interest rate of 5, 10 or 15 years as we are used to in the Netherlands is hardly offered.
The interest rate offered varies from bank to bank. At banks that have a separate department for non-resident customers, the interest rate offered is often about 1% higher than at regionally operating banks or “private banks. The interest rate level of these banks is comparable or slightly lower than the prevailing Dutch interest rate level.
French finance culture is focused on paying off a mortgage quickly. Therefore, maturities of 30 years are not common. For non-resident buyers, terms of 25 years are possible, but often the maximum term is also 20 years. See more information on maturities under “Age and maturity”
A closing commission is common in French banks. It varies by bank. Sometimes it is several hundred euros, sometimes 1% of the loan amount.
Term life insurance is required by most banks. A few French banks are willing to waive the requirement to purchase death benefit insurance. See more information on term life insurance under “Age and Term”
Banks are commercial institutions, and especially for non-resident customers – for whom they have to go the extra mile – they make it a condition that, in addition to the loan, other products from this bank must be purchased, such as a checking account, fire insurance and sometimes a savings account into which a certain minimum amount must be deposited.
If the loan is repaid early, a penalty is due from French banks. However, consumers are better protected than in the Netherlands, and the penalty for early repayment is capped by law in France.
A bridging loan is possible if the house being bridged on is also in France. Bridging on a house located in the Netherlands or a country other than France is not possible.
The release of surplus value through a mortgage is not possible in France unless the amount to be released will be used to purchase another property. Releasing money for consumption purposes or to supplement retirement is therefore not possible.
It is still possible to apply for so-called post-financing for up to 6 to 9 months after the purchase. In other words, recover the funds advanced for the purchase through a mortgage.
It is possible to obtain a mortgage if the buyer of the property is the French company de SCI or SARL de famille. Ask yourself whether buying through such a legal form is really necessary and useful and whether the advantages outweigh the disadvantages. Also weigh the significant incorporation and ongoing costs in your decision to buy through such a legal form in France.
Duration and Age
Regarding the age aspect, the financing culture in France is different from that in the Netherlands. The maximum age at which a mortgage must be terminated is at age 75. A single bank can finance up to age 80. This aspect has an impact on the maximum term and thus the feasibility of a mortgage application.
Maturities of 25 years are possible for non-resident buyers, but at some French banks the maximum maturity is up to 20 years. However, with a higher starting age of the mortgage, the term may be shortened by the upper limit of age 75 or 80.
If the starting age shortens the term of the mortgage to be applied for, the monthly charge on an annuity mortgage will be higher. This can have an impact on the maximum amount to borrow. After all, the higher monthly burden may cause the assessment standard to be exceeded.
When mortality insurance is mandated, it can also impact the term. If a bank makes it mandatory to purchase insurance from them and the maximum end age of the insurance is less than age 75 then this can shorten the term.
Of course, not being able to obtain death benefit insurance for medical reasons at all can be a showstopper. Sometimes such a shortcoming can be circumvented.
France has legal rules against “usury. If the effective interest rate exceeds a certain threshold(taux d’usure) then this can be a problem because the bank is then not allowed to lend. In addition to the closing commission, the effective interest rate also includes the premium for term life insurance. Thus, with advanced age or premiums increased for medical reasons, this may come into play. Even with relatively small loan amounts of approx. €100,000 this problem does sometimes play a role, because additional costs then weigh more heavily in the effective interest rate.
Purchase route France
When you have found the house you want to buy then the whole process of buying in France also starts. Below are the different steps of the process
Bidding is a little different in France than in the Netherlands. Keep in mind French sensitivities. We can put you in touch with a Dutch-speaking party who will negotiate for you (purchase broker).
Start the application process well in advance. You may already be able to cut a little corner by submitting the application in advance as soon as possible. See “APPLICATION PROCESS.
In doubt about the structural condition of the house? Then have a building inspection performed. We can put you in touch with a Dutch-speaking inspection agency.
Buyer and seller choose a notary by mutual agreement. It is also possible to each choose their own notary. We can put you in touch with French notaries who also speak English or Dutch.
We can assist you in arranging a notarized power of attorney to complete the purchase from the Netherlands. We have contacts with a Dutch notary where the process of making the power of attorney can be arranged “remotely” (via video call).
The impetus for a purchase agreement(Compromis de Vente) is sometimes provided by the selling broker, but usually it is the notary who provides the first draft. We can put you in touch with a Dutch-speaking lawyer specializing in this who will check the draft agreement for you.
The condition precedent for financing is common in the French sales contract. Contact us for advice on content.
In addition to the condition precedent for financing, other reservations may be involved; for example, for obtaining a building permit.
The selling party takes care of the reports that are required to be attached to the purchase agreement. These are reports on such things as wood-eating insects, asbestos, lead-based paint, flood hazards, the septic tank and the energy rating of the house.
Preferential rights may be involved in properties for sale with a lot of land. In this process, adjacent landowners (mostly local farmers) are given the opportunity to buy pieces of land. The body that regulates this is the “Safer. This process takes 2 months, but there is an option for an expedited procedure.
After all parties sign the purchase agreement, the legal 10-day cooling-off period begins. A down payment of 5% to 10% of the purchase price is common and is made to the notary’s trust account.
The resultant of the mortgage application process is the receipt of the unconditional loan offer or also called the unconditional mortgage offer. Upon acceptance of the loan offer, the bank is ready to release the mortgage funds at the notary’s call and deposit them into the notary’s trust account.
When the sale is imminent, your home should be insured for fire (and theft). Hypotheek & Buitenland has contacts with several (Dutch-speaking) parties who can provide competitive quotations for this purpose.
Having a French bank account is indispensable when you own a home in France. Hypotheek & Buitenland can help you open a bank account “remotely” i.e. without having to physically go to France.
The notary prepares the deed of sale and requests the mortgage funds from the bank and asks the buyer to transfer the remaining portion of his own money to his third-party account. On the day the purchase deed is signed at the notary, ownership is officially transferred and the notary pays the seller the purchase price and settles all taxes due.
How long the buying process takes depends on what delaying elements are involved. Some trajectories last 2 months some 2 years.
New and remodeling
It is possible as a non-resident of France to get a mortgage for new construction or renovations. However, this is subject to strict conditions by the banks. They only want to finance construction projects done by official French contractors, and they do not want to finance self-builds. There are 3 different types of new construction (agreements): VEFA, CCMI or Marché de traveaux.
The maximum financing rate for new construction is applied to the sum of the land purchase and total construction cost.
For renovations, the maximum financing rate is applied to the sum of all renovations for which quotes are available from official French contractors. Some banks are willing to apply the financing rate to the expected value of the property after renovations. If the property is not already “fully” financed, the renovations can then potentially be fully financed.
The process of getting financing for new construction done requires intensive guidance and is time-consuming. Hypotheek & Buitenland also accompanies these routes, but at a higher rate for the service compared to financing existing construction.
To apply for a mortgage when working with a Dutch contractor, “a male” or self-build, French banks do not finance. Only when working with official French contractors can new construction or renovations be financed with a mortgage. Importantly, the contractor(s) must have a SIRET number and all legally required insurance, including the “ten-year warranty.
New construction where land and the property to be built are purchased in one sale is done through a VEFA(Vente en Etat Futur d’Achèvement) agreement. This type of new construction is also called “turn-key” or “turnkey” purchase. The equivalent of the purchase agreement in such a sale is the “reservation agreement. You see this type of new construction a lot when building apartments (for example, in the French ski resorts).
The Contrat de Construction de Maison Individuelle (CCMI) is the usual construction agreement when land is already owned on which to build. This construction agreement is made with a construction company where there are already construction plans from an architect or existing plans “from catalog.
New construction involving loose contracts with various contractors who take on the construction. Coordination and construction supervision is done by a “maitre d’ouevre” (project manager who coordinates and supervises construction).
A fully documented building permit application should be made to local authorities. The purchase of building land often includes a condition precedent in case the building permit is unexpectedly not granted.
Self-construction or renovations that people want to do themselves are not financed by French banks.
This umbrella insurance provides coverage against situations where a builder or architect (or their insurance company) does not consider themselves liable for construction defects in new construction or major remodeling. Potentially years of legal battles then await. The Assurance dommage ouvrage removes these uncertainties and the insurer ensures immediate recovery and takes up the legal battle on your behalf towards the construction company or architect. Insurance is required by law, and banks often mandate such insurance.
Appraisal for new construction or remodeling is done by an appraiser’s assessment of the future value after completion (based on the construction plans).
Release of mortgage funds is made from construction deposits at the client’s call as works progress and invoices come in. The condition is that a mortgage guarantee is placed on the land by mortgage deed. With most banks, the mortgage remains repayable until the construction deposit is drawn in its entirety (usually with a maximum term of max 2 years). Interest is then paid on the released funds and a commitment fee on the mortgage funds not yet released.
Rental objects
Seasonal rental of a French vacation rental house is quite common and mortgage lending French banks are fine with it. Only when a property is overwhelmingly going to be the source of the (only) income in the future do people not want to finance it regularly. Rental income is taxed in France and not in the Netherlands. A tax return on this income must therefore be filed in France.
French banks usually have no problem with seasonal rental of a house purchased with a mortgage based on existing income. What is important is that the property is not too commercial in nature. So existing Chambres d’hotes / Bed & Breakfasts, hotels, or properties with multiple gites or lots of rooms (with separate bathrooms) may lead the bank to conclude that there are plans other than purely private use and occasional seasonal rentals. When banks suspect that prospective clients have plans to “change course” and start or take over a tourism business in France, they conclude that the existing income will end and that the requested mortgage is in fact business financing is.
Purchase of a French house or apartment that is newly built where there is the tax benefit of VAT refund are so-called residence de tourisme properties. Attached to the VAT refund is the obligation of furnished seasonal rental of at least 9 years. In addition, VAT refunds are subject to additional requirements – including a reception desk, linen service and cleaning – in which operation by a rental organization – with which the owner draws up an operating agreement – is indispensable.
The tax treaty between the Netherlands and France provides that France may levy taxes on assets in the form of real estate located in France such as a second residence. As a result, the (net) value of a French house is taxed in France and no longer in the Netherlands (box 3). Rental income is taxed in France and thus should be taxed in France.
Renting out a French house partially financed by a mortgage can be an interesting addition to retirement. When rental income covers the mortgage and other expenses then the house “comes to you” because after full mortgage repayment there remains a mortgage-free home that generates rental income.
There are several rental platforms for second homes. These platforms offer services of varying degrees. From rental mediation only (via a booking module) to complete outsourcing of the rental including local handling.
Acceptance of collateral
French banks are critical of the type of property to be financed. Houses that are not habitable or are located very remote are considered insufficiently current and are often not financeable through a bank. Banks are also particularly reluctant to mortgage special properties such as castles and wine estates. The fact that enforcing the collateral by auction is also not a guarantee of success in France plays an important role here.
French banks do not want to finance all houses. Only those houses that are sufficiently current in their eyes, i.e. houses that – should the (financial) need arise – can be sold again somewhat smoothly, are they willing to finance.
Houses that are in such poor condition that they are not habitable will not want to be financed by a bank. Core elements of this are that, at a minimum, a house should have running water, a somewhat up-to-date electricity supply, heating, a sewer connection or functioning septic tank, a kitchen and a bathroom. If the renovations required to bring the house into a good habitable condition are co-financed then this usually overcomes the bank’s objections.
Very remote situated houses – far from a village or town – and far from “civilization” are more difficult to finance than houses that are more “in civilization. There are also certain obsolete regions where banks are more reluctant to finance than in regions with booming housing markets. For example, there are parts of the Auvergne region where there is a net outflow of residents and housing market is very thin.
Objects such as castles, wine estates, water mills, churches converted into homes are difficult to finance. There is a (very) small market for this type of special property and sales can take years. Houses that are very A-typical for the region can also be a problem, as can houses with a lot of land (tens of hectares). Indeed, banks are wondering if such a “non-resident buyer” is going to manage to maintain all that land.
Basic condition for financing for French banks is that permanent habitation is allowed and there is a residential use on the house. With recreational homes (on a recreational park) or wooden chalet construction (this does not mean a chalet in the Alps), this is usually not the case and therefore mortgage financing is not possible.
Contributing a very large portion of your own money to a purchase increases the chances of winning over the bank to finance. But for many objects, that is often not enough either. At play here is the fact that the system of reclaiming collateral by auctioning it – as the ultimate consequence of no longer (being able to) meet monthly mortgage obligations – does not work well in all regions in France. After all, sometimes a house also fails to sell at auction for a sufficient amount.
Houses or properties where it is abundantly clear to a bank that they will be operated as commercial properties in the future (for example, in the tourism sector) are not financed as second homes based on existing income. In doing so, some banks are more rigorous than others. For some it is already a bridge too far if there is a large stable near a house or a piece of land on which small-scale farming takes place. It is feared that an equestrian center/stable will be started or an agricultural business, which will generate the income in the future.
Funding business plans
Hypotheek & Buitenland does not currently accompany applications for business financing in France. Thus, we cannot help with mortgage applications for starting or taking over a property in the tourism sector, where it is clear that the existing income in the Netherlands will be lost. The services of Hypotheek & Buitenland are currently limited to mortgage advice and mediation for the purchase of a second or vacation home. For advice on business financing, see the section FINANCE WITHOUT BANK
If you have plans to start / take over a Chambres d’hôtes / Bed & Breakfast , operate gtes, buy or start a (mini) campground or hotel where the property to be purchased in France is central and where the future income stream resulting from the business activities is required to meet the monthly mortgage payments, then that no longer falls under applying for a regular mortgage based on existing income. That’s when enterprise financing is involved. If you want to qualify, then – as in the Netherlands – a business loan will have to be applied for at a local bank where the business plan – and thus the future expected income stream – is the basis.
Hypotheek & Buitenland cannot guide you through this type of process and cannot assist you in applying for business loans with French banks. Our services are limited exclusively to advising and mediating the acquisition of mortgage credit where an existing and steady income forms the basis for the purchase of a second or vacation home.
An increasingly common route for funding business plans is to find a loan through a crowdfunding platform. For advice on this type of business financing, see the section.
In some exceptional cases, it is possible for a property in France – where the plan is to do business there in the future – to be purchased initially as a second home. This is possible only if a bank is convinced that there are no plans to move to France in the near future and build a new life (with a new source of income) there.
Purchase and ongoing costs
The “buyer’s fees” (also known as “notary fees”) generally include the total costs due in taxes and notary fees. These costs are twofold: one part the costs related to the purchase of the property and the second part related to the notarization of the mortgage. When buying existing construction, the rule of thumb that the total cost is about 7.5% cost is quite accurate. Please contact Mortgage & Abroad if you would like a detailed calculation of the cost of buyer.
Transfer tax and departmental stamp duty are payable when purchasing existing construction. In addition, the buyer pays the notary’s fee for his services. The size of both elements are fixed in France. There are (marginal) regional differences in the size of departmental stamp duties.
New construction involves notary fees for the purchase of the land and notary fees related to the notarization of the mortgage. The type of mortgage registration for new construction is different from existing construction. New construction involves a conventional full mortgage registration(Hypothèque conventionnelle) whereas for existing construction – the cheaper – mortgage registration “light” suffices: the PPD(Privilège de Prêteur de Deniers).
In France, it is not unusual for a mortgage guarantee to be established in the form of a caution. In effect, the lending bank then receives a bond from the cautionnaire (a credit insurer specializing in this) that guarantees repayment of the loan amount if the borrower defaults. Intervention of a notary is not required and therefore a caution is a favorable solution for the borrowing party because it is cheaper than a traditional mortgage guarantee. Instead, the borrowing party pays a percentage on the amount borrowed. In the event of default and therefore when the guarantor is called upon, the guarantor will also eventually turn to the borrower to demand repayment of the amount borrowed. Only a few regional banks offer this option for non-resident customers.
In addition to the buyer’s cost, other costs are often involved, such as costs for a building inspection, the legal check of the purchase agreement, an appraisal, translations, legal, tax and financial advice and – if applicable – the formation costs of an SCI.
Once you own the house, you will owe annual local taxes; the taxe fonciere and the taxe d’habitation. Also take into account the annual recurring costs, when purchased in an SCI. Annual accounting and tax consulting fees are then involved or – if you do not choose not to file a tax return – 3% of the net value (house value -/- size of mortgage) of the house.
The plus value tax is a French tax meant to discourage property speculation and is due when you sell the house at a profit. The longer the house is in your possession the lower the taxes owed. After a certain period, you owe no plus value taxes at all when you sell.
On equity put into a French house, the tax treaty between the Netherlands and France agrees that France may in principle levy taxes on it. Specifically, the house does have to be declared in the Netherlands in the tax return, but a “double taxation avoidance” is applied that makes the net value of the house not included in the box 3 calculation. In contrast, wealth tax is levied on real estate assets in France(Impôt sur la fortune immobilière (IFI)), but there high thresholds are involved and the levy is usually zero. Only when the thresholds are exceeded – and that is for amounts greater than 1.3 million – will France effectively levy.
Good preparation
Being well-prepared is often half the battle and, once you get deeper into the buying process, it prevents stress and panic attacks. In short, to be well prepared is to buy carefully and in a controlled manner. We can also be of service to you already in the preparation process. We have an extensive network of notaries, specialized legal advisors and tax specialists. But also specialists who can perform a building inspection.
Is buying and owning a house in France really for you? And how do you address it? There are legions of books available on this subject.
If you are going to buy a house in France then some knowledge of the French language is essential. It starts with language, even in France.
If you do not know what you have to spend then you cannot search for a house. Get advice on this; based on available equity and your borrowing capacity, the buying budget can be determined. Contact us for a free exploratory “quick scan” and possibly a pre-application.
Good planning gives overview and thus control of your project. Create a timeline showing approximately how much time you will spend on each stage of the buying process.
Avoid dwelling too much on multiple thoughts (regions). Focus on a particular French region and thus avoid an overly broad orientation that will cost you too much time and make it just search and your plan will never become concrete.
To be prepared for applying for a mortgage later, it is very wise to prepare for it at this stage. In fact, a lot of documents will be requested regarding your identity, income, expenses and future collateral.
If you have never bought a house in France before, it is unwise to want to handle the purchase without outside help. You will find that it is impractical to have to reinvent the wheel on every subject. Moreover, a good advisor makes his money back. Identify which advisors you can approach; for example, regarding advice on the content of the purchase agreement(Compromis de Vente), tax advice or an architectural inspection.
You may nominate your own preferred French notary. If you already know where you are going to buy then it may make sense to choose a notary already. Hypotheek & Buitenland can help you find a notary who is familiar with foreign clients and also speaks English or even Dutch.
We can help you prepare a notarized power of attorney to complete the purchase from the Netherlands (i.e. without having to travel to France to sign personally with the notary). We have contacts with a Dutch notary where the process of making the power of attorney and apostille can be arranged remotely (via video call).
When it is clear that buying into an SCI or SARL de famille is really the best choice for you, it is important to realize that you are going to set up a company in France. There will have to be articles of association, a deed of incorporation, registration with the French Chamber of Commerce, and the company must be registered with the French tax authorities. In addition, a bank account in the name of the company will need to be opened. We can put you in touch with a Dutch agency specializing in this.
Especially with somewhat larger purchase amounts, it is wise to think about “estate planning” in advance; in other words, avoiding paying (too much) inheritance and inheritance tax in the future. To this end, it makes sense to make choices regarding the legal design of the purchase prior to the purchase. Hypotheek & Buitenland can put you in touch with legal advisors specialized in this.
Would you like to receive a comprehensive checklist? Contact Mortgage & Abroad.
Mortgage transfer
Refinancing an existing mortgage on a French home is possible with some banks, but on modified terms. Furthermore, it is only possible to transfer loans that are notarized and with a mortgage guarantee.
The costs can be significant. Especially if a high loan prepayment penalty is involved.
‘Revolving’ or refinancing an existing mortgage resting on the French house is possible with some French banks. The condition is that the current loan is notarized with a mortgage guarantee. Otherwise, banks don’t want to refinance.
The conditions under which French banks are willing to refinance are often different from those of a regular purchase. Typically, one is more cautious and one looks with critical eyes at the motive for refinancing. This is often reflected in a lower maximum financing rate and a shorter term.
When refinancing/transferring, you will face costs such as deregistering the existing mortgage(frais mainlevée) and registering the new mortgage(garantie hypothécaire). But also with the bank’s filing fees, advisory fees and most importantly; the penalties for early repayment of the existing mortgage.
The key question, of course, is whether the costs outweigh the benefits.
