In France, when buying a house you must go through a very strict process involving the services of certain professionals throughout the process.
You will need an Agent Immobilier (Estate agent). An Agent Immobilier is professionally qualified and should have a Carte Professionnelle, it is very important that you make sure they have this card. There should be Estate Agents in most towns. The agent earns commission from the sale of the property, so they will no doubt do their best for both the seller and buyer. The agent should also be able to give you an estimation of all fees and property charges that the buyer will have to pay when they become the owner.
You will also need a Notaire. The notaire is a public offical and highly qualified in the French legal system and can advise you on lots of different laws such as family and succession law (these are a bit different to UK laws). The notaire prepares the various documents confirming the sellers title to the property, checking that there are no exisiting mortgages on the property, the final conveyance and the registration. The notaire also has indemnity assurance, which provides financial guarantee to the client. You can find a list of notaires in France on the following website www.notaires.fr, there is even a search facility for english speaking notaires.
Architects and Surveyors may also be needed. It is not standard procedure in France to have a property survey but it can be requested by the buyer. If buying an older property or one that you wish to renovated then the architect or surveyor should be used. They also have lots of experience in obtaining all of the permissions and certificates needed.
All mortgages in France must be covered by life assurance; many French lenders insist their insurance policies are used and that all the terms of the mortgage are covered. However certain types of properties are not acceptable for mortgage finance.
When buying in France remember to think of the costs involved. The payment of a deposit is not obligatory but in general it is asked for by the seller as a show of good faith. It is usually a maximum of 10 percent of the purchase price for older properties.For an existing property, expect to pay eight percent of the purchase price as the cost for the notaire/legal fees. Notaire fees can only be included in the mortgage of French tax payers. Those paying tax in another country have to fund the notaire fees themselves.An amount between five and ten percent is charged and this amount is normally at the expense of the buyer; in some regions of France may be paid by the seller or split between buyer and seller. Either way, the price of the property to the buyer remains the same.When raising a mortgage, these fees can be included in the mortgage.
There are two taxes on all residential property. These are collected by the State for the local authorities. These taxes are assessed at individual rates according to location and can vary substantially. It is advisable to ask the estate agent for these details when looking at properties to buy.
There are also two kinds of tax that must be paid -
Taxe foncière (land tax)
The owner of a property on the first day of January is liable for paying this tax which is due for payment by 15 October. Penalties or fines are added for late payment. A monthly payment scheme can be arranged at the outset.On the sale of a property, the new owner is obliged to pay the vendor the balance of taxe foncière on a pro-rata basis.
Taxe dhabitation (local taxes)
This tax is only due on a habitable building. The occupant of the property on the first day of January is liable for paying this tax. If a property is furnished and supplied with water and electricity this tax must be paid (even if it is only used occasionally). The amount of this tax varies depending on location and according to the size of the property.A tenant resident in a property on the first day of January in a year is liable for paying this tax.
Thank you to Geraldine Mcdougall for her contribution to this section
What do you need to open a bank account?
To open a bank account you will need proof of address in France for such as a utility bill and a form of photo identification. However, in some specialist banks, such as Credit Agricole Britline, you do not require a French address in order to open a bank account. It is best to ask each bank if anything else is needed to open an account.
What are the different kinds of bank accounts?
There are different kinds of accounts -Compte Courant - Current Account, Compte Joint - Joint Account, Compte Epargne - Savings Account. If you open a current account you should recieve a debit card (Carte Bancaire) and a cheque book ( Chequier). You do not have to have either one of these if you do not wish. Every month you will recieve your account statement (Releve de Compte).
Are there any charges?
There are different charges which have to be paid everything month such as a monthly charge (Frais) for your bank card - discuss this with your bank as it may be possible to reduce this amount especially if you have a joint account with two cards! If you decided that you would like an agreed overdraft facility (decouvert), you will also have to pay a charge even if you do not use it.
How do I pay a bill?
Bills can be paid by either cheque or direct debit, (prelevement). To set up a prelevement, you will normally be asked for a Releve dIdentite Bancaire (RIB), which is a slip normally found in the back of your cheque book. This states your bank account identity details.
How do I write a cheque?
The amount in words goes at the top of the cheque (the opposite to the UK), underneath is written who the money needs to be paid to. The amount in numbers goes to the box on the right (as in UK) but use commas instead of decimal points. Underneath you need to write the name of the location (town, village) where the cheque was written, and enter the date underneath. Your signature then goes underneath that.
Cheque guarantee cards are not needed in France and cheques are accepted as if they were a cash payment. It is illegal to write a cheque if you do not have the funds to cover it in your account and you risk your bank reporting you to Frances national banking authority, (Bank de France), which can forbid you from using cheques for five years.
If Paying by cheque in shops and supermarkets you will have to give a form of ID which will then be written on the back of the cheque.
A cheque is valid for 12 months and 8 days and when deposited in to your account you have to remember to put your signature on the back of the cheque.
Can I transfer money from abroad?
You can transfer money internationally. A small levy will be charged per transaction (Avis dOperation) from your French bank and it is also normal for the foreign bank to charge. When transferring money you are exposed to the fluctuations in the exchange rate which can be costly. You can protect your money from this buy arranging a foreign exchange contract with a company like HiFx.
How do I find a bank?
You can find your local bank by searching for Banque in the Yellow Pages (Pages Jaunes).
The main French banks are;
Allianz Banque, AXA Banque,Banque Accord,Banque Populaire, Barclays France, BNP Paribas, Caisse dEpargne, CIC, Credit Agricole (has service specifically for UK expats living in France; Britline), Credit Mutuel, HSBC France,ING Direct, La Banque Postale,
Thank you to Geraldine Mcdougall for her contribution to this section
Mortgages or home loans (hypothèque) are available from all major French banks (for both residents and non-residents) and many foreign banks. The French post office also offers mortgages, but you must have been contributing to a plan or compte d’épargne logement for at least 18 months to qualify.
It’s possible to obtain a foreign currency mortgage, other than in euros, e.g. GB£, Swiss francs or US$.
Tip: If you need to obtain a mortgage to buy a home in France, you should shop around and compare interest rates, terms and fees (which can be very high) from a number of banks and financial institutions – not just in France but also in your home country. Bear in mind that mortgages in France are generally for a shorter period than in the UK and US, and therefore your repayments may be much higher.
It’s generally recognised that you should take out a loan in the currency in which you’re paid or in the currency of the country where a property is situated. In this case, if the foreign currency is devalued you will have the consolation of knowing that the value of your French property will have increased by the same percentage when converted back into the foreign currency. When choosing between a euro loan and a foreign currency loan, be sure to take into account all costs, fees, interest rates and possible currency fluctuations.
You should be extremely wary before taking out a foreign currency mortgage, as interest rate gains can be wiped out overnight by currency swings and devaluations.
However you finance the purchase of a second home in France, you should obtain professional advice from your bank manager and accountant. Most French banks offer euro mortgages on French property through foreign branches in EU and other countries. Most financial advisers recommend borrowing from a large reputable bank rather than a small one. Crédit Agricole is the largest French lender, with a 25 per cent share of the French mortgage market. UCB is part of the French BNP Paribas group and specialises in arranging mortgages for foreign buyers (in conjunction with the Abbey building society).
Both French and foreign lenders have tightened their lending criteria in the last few years as a result of the repayment problems experienced by many recession-hit borrowers in the early ’90s. Some foreign lenders apply stricter rules than French lenders regarding income, employment and the type of property on which they will lend, although some are willing to lend more than a French lender. It can take some foreigners a long time to obtain a mortgage in France, particularly if they have neither a regular income nor assets there. Note also that it can be particularly difficult for a single woman to obtain a mortgage in France. If you have difficulty, you should try a bank that’s experienced in dealing with foreigners, such as the Banque Transatlantique (http://www.transat.tm.fr ).
It’s also possible to remortgage or take out a second mortgage on an existing property.
All French mortgages are repaid using the capital and interest method (repayment); endowment and pension-linked mortgages aren’t offered.
Interest rates can be fixed or variable, the fixed rate being higher than the variable rate to reflect the increased risk to the lender. The advantage of a fixed rate is that you know exactly how much you must pay over the whole term. Variable rate loans may be fixed for the first two or more years, after which they’re adjusted up or down on an annual basis in line with prevailing interest rates, but usually within preset limits, e.g. within 3 per cent of the original rate.
You can usually convert a variable rate mortgage to a fixed rate mortgage at any time. There’s normally a redemption penalty, e.g. 3 per cent of the outstanding capital, for early repayment of a fixed rate mortgage, although that isn’t usual for variable rate mortgages. If you think you may want to repay early, you should try to have the redemption penalty waived or reduced before signing the agreement.
An alternative to a hypothèque is a privilège de prêteur de deniers (PDD), which is marginally cheaper but has certain restrictions (e.g. you can only take out a PDD at the time of purchase and may not take out a PDD for more than the purchase price of a property).
A quick comparison between the mortgages offered by the principal lenders can be made using Finance in France’s online ‘mortgage machine’ (http://www.financeinfrance.com ).
It’s customary in France for a property to be held as security for a loan taken out on it; in other words, the lender takes a charge on the property. However, some foreign banks won’t lend on the security of a French property.
French law doesn’t permit French banks to offer mortgages or other loans where repayments are more than 30 per cent of your net income. Joint incomes and liabilities are included when assessing a couple’s borrowing limit (usually a French bank will lend to up to three joint borrowers). Note that the 30 per cent limit includes existing mortgage or rental payments, both in France and abroad. If your total repayments exceed 30 per cent of your income, French banks aren’t permitted to extend further credit. Should they attempt to do so, the law allows a borrower to avoid liability for payment.
To calculate how much you can borrow in France, multiply your total net monthly income by 30 per cent and deduct your monthly mortgage, rent and other regular payments. Note that earned income isn’t included if you’re aged over 65. As a rough guide, repayments on a €60,000 mortgage are around €600 per month at 6 per cent over 15 years. French mortgage interest rates have been falling in recent years, making French mortgages particularly attractive. In October 2005, the maximum interest rate for a fixed rate mortgage was 6.03 per cent and maximum variable rate interest was 5.53 per cent.
As a condition of a French mortgage, you must take out a life (usually plus health and disability) insurance policy equal to 120 per cent of the amount borrowed. The premiums are included in mortgage payments. An existing insurance policy may be accepted, although it must be assigned to the lender. A medical examination may be required, although this isn’t usual if you’re under 50 years of age and borrowing less than €150,000.
A borrower is responsible for obtaining building insurance on a property and must provide the lender with a certificate of insurance.
French mortgages are usually limited to 70 or 80 per cent of a property’s value (although some lenders limit loans to just 50 per cent). A mortgage can include renovation work, when written quotations must be provided with a mortgage application. Note that you must add expenses and fees, totalling around 10 to 15 per cent of the purchase price on an ‘old’ property, i.e. one over five years old. For example, if you’re buying a property for €75,000 and obtain an 80 per cent mortgage, you must pay a 20 per cent deposit (€15,000) plus 10 to 15 per cent fees (€7,500 to €11,250), making a total of €22,500 to €26,250.
Mortgages can be obtained for any period from 2 to 20 years, although the usual term in France is 15 years (some banks won’t lend for longer than this). In certain cases mortgages can be arranged over terms of up to 25 years, although interest rates are higher and a mortgage must usually be paid off before you reach the age of 70 (in some cases 65). Generally the shorter the period of a loan, the lower the interest rate.
All lenders set minimum loans, e.g. €15,000 to €30,000, and some set minimum purchase prices. Usually there’s no maximum loan amount, which is subject to status.
In France, a mortgage cannot be transferred from one individual to another, as is possible in some countries, but it can usually be transferred to another property.
If you fail to maintain your mortgage repayments, your property can be repossessed and sold at auction. However, this rarely happens, as most lenders are willing to arrange lower repayments when borrowers get into financial difficulties.
To obtain a mortgage from a French bank, you must produce your passport (or a copy) and those of any joint applicants and provide proof of your monthly income and all out goings such as mortgage payments, rent and other loans or commitments. Proof of income includes three months’ pay slips for employees, confirmation of income from your employer and tax returns. If you’re self-employed, you require an audited copy of your balance sheets and trading accounts for the past three years, plus your last tax return. French banks aren’t particularly impressed with accountants’ letters. If you want a French mortgage to buy a property for commercial purposes, you must provide a detailed business plan (in French).
It’s possible to obtain agreement in principle to a mortgage, and most lenders will supply a guarantee or certificate valid for two to four months (in some cases subject to valuation of the property), which you can present to the vendor of a property you intend to buy. There may be a commitment fee of around €150, but the deposit paid when signing a preliminary property purchase contract (compromis de vente) is protected under French law should you fail to obtain a mortgage.
Once a loan has been agreed, a French bank will send you a conditional offer (offre préalable), outlining the terms. In accordance with French law, the offer cannot be accepted until after a ‘cooling off’ period of ten days. The borrower usually has 30 days to accept the loan and return the signed agreement to the lender. The loan is then held available for four months in the case of a normal purchase; it can be used over a longer period if it’s for a building project.
Tip: French banks and other mortgage lenders sometimes withdraw an offer at the last minute, so it’s wise to have a provisional arrangement with another lender as a back-up.
There are various fees associated with mortgages. All lenders charge an administration fee (frais de dossier) for setting up a loan, usually 1 per cent of the loan amount. There’s usually a minimum fee, e.g. €350 plus VAT (TVA), and there may also be a maximum.
Although it’s unusual for buyers to have a survey in France, foreign lenders usually insist on a ‘valuation survey’ (costing around €250) for French properties before they grant a loan.
If a loan is obtained using a French property as security, additional fees and registration costs are payable to the notary (notaire) for registering the charge against the property at the bureau des hypothèques, which amounts to around 2.5 per cent of the amount borrowed.
If you borrow more than a certain amount (e.g. €150,000), you may be obliged to take out life insurance.
If you borrow from a co-operative bank, you’re obliged to subscribe to the capital of the local bank. The amount (number of shares) is decided by the board of directors and you will be sent share certificates (certificat nominatif de parts sociales) for that value. The payment (e.g. €75) is usually deducted from your account at the same time as the first mortgage repayment. When the loan has been repaid, the shares are reimbursed (if required).
Note that if you have a foreign currency mortgage or are a non-resident with a euro mortgage, you must usually pay commission charges each time you make a mortgage payment or remit money to France. However, some lenders will transfer mortgage payments to France each month free of charge or for a nominal amount.
If you’re buying a new property off plan, when payments are made in stages, a bank will provide a ‘staggered’ loan, where the loan amount is advanced in instalments as required by the contrat de réservation. During the period before completion (période d’anticipation), interest is payable on a monthly basis on the amount advanced by the bank (plus insurance). When the final payment has been made and the loan is fully drawn, the mortgage enters its amortisation period (période d’amortissement).
If you have spare equity in an existing property, either in France or abroad, it may be more cost-effective to remortgage (or take out a second mortgage) on that property than to take out a new mortgage for a second home. Depending on the equity in your existing property and the cost of a French property, this may enable you to pay cash for a second home. There may be several advantages to remortgaging, including the following:
The disadvantages of remortgaging or taking out a second mortgage on an existing property include the following:
French lenders have traditionally been reluctant to remortgage, but new rules introduced in spring 2006 mean that ‘equity release’ mortgages should be available by 2007. There will be two types of ‘product’: a crédit hypothécaire rechargeable, which allows you to reborrow the amount you’ve already paid off on an existing mortgage, and a prêt viager hypothécaire, which enables you to release the ‘capital’ tied up in a property as a result of an increase in its value. Before taking out either type of mortgage, you must visit a notaire, who will warn you of the risk you’re undertaking!
This article was sourced from www.justlanded.com