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Traditionally, French banks have required deposits of 15- 20% from those buying in France. But, in an effort to compete with the UK and Ireland, France is tailoring its finance to suit the international investor.
Mortgages of 100% are now available on selected leaseback* properties, with the investor paying a 5% deposit upon reservation, which is then used to cover all stamp duty/legal costs on completion, with any leftover money being refunded to the investor.
Three-year fixed rate repayment mortgages are available at just 3.45% and it is possible for investors to use the property as a holiday home for two weeks every year. With the 100% mortgage, investors will experience a small, monthly shortfall, whereby the rental income covers most (but not all) of the monthly mortgage costs. (Although this can be covered by paying a traditional deposit of around 20%.)
Martin Sadler, sales manager of Assetz France, the property investment company, comments: "Highly geared French properties are appealing to professional investors looking to expand their portfolio with a hassle-free leaseback investment, which will cost them a minimal initial cash outlay."
"Property prices have been rising at a steady 10.3% over the last ten months, and the rental market in France continues to look strong, driven by high demand and minimal new development."
Some lenders have also relaxed their debt ratio from the traditional 33% to 40%. French banks use a debt ratio to assess the suitability of a non-resident property investor. The individual's outgoings, including current mortgages and loans and the intended French mortgage must not make up more than one third, or now 40% of his or her income after tax, in order for them to be considered suitable for a French mortgage.
The buying process in France is generally becoming more straightforward for British and other foreign investors, with mortgage and legal paperwork commonly available in English.
Leasebacks explained:
Introduced by the French Government twenty years ago, French Leasebacks seek to generate tourism by increasing the quantity of good holiday accommodation in locations such as the Cote D'Azur, the Alps and Paris. It enables investors to purchase a freehold property, which they then lease back to a pre-selected property management company, earning a guaranteed rental income for at least nine years. Investors also benefit from a 16.4% discount on the property price, since the French Government provides a VAT cash back upon completion. (But don't pin your hopes on getting the cash back pronto!)
Whilst the property is being leased back to the management company they are responsible for its maintenance, leaving owners with minimal annual costs and involvement. This managed scheme can be a very sensible way for people to get involved in overseas property ownership and rental without committing too much time.
Assetz: 0161 456 4000 or visit http://www.assetz.co.uk/