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In the purchase of a French property as for any property an unavoidable matter is that of financing your purchase. French banks are now used to financing British clients purchasing a French property. For currency transfer you should prefer specialised companies. As for the costs related to buying a French property they are reduced as compared to when buying a resale French property. The running costs of a new build French property are lower too than for a resale French property.

Financing you purchase

Before even starting your quest for your dream French property you should have an idea of how much you can spend on it and/or if you are using a mortgage how much you can expect to borrow.

French property loans up to 80% of property value

If you take a French mortgage you may borrow around 80% at most of the property value. French mortgages are fixed or variable but capped (ie with a maximum amount of increase and decrease). French banks are now used to foreign loans. They will quickly give you a decision in principle so that before choosing, visiting, signing a reservation contract you know how much you can spend on your new French property. This will avoid frustration and save time and travel costs.
Even if you are raising a mortgage you may have to pay such costs as conveyancing fees, mortgage registration fees and bank administrative fees on your own funds if the bank takes over the stage payments afterwards since these costs are payable when signing the deed of sales. Some developers include in their reservation contract an estimate of these costs so that you know well in advance.
 

Currencies exchange

You may want to take advice with currencies exchange companies who can organise regular transfers to your French bank account for mortgage repayments in the best possible conditions. Usually these currencies exchange companies offer better deals than banks.

French lending criteria

- Lending criteria are stricter in France than in UK. First the loan amount is not based on the value of the property but is calculated as a proportion of your income. The loan cannot exceed 33% of your gross income (or net income depending on the lender).
- You can’t apply with self certification of income but will be asked proves of your income such a salary slips of last 3 months, tax declaration, last 3 months bank statement, mortgages and loans repayment schedule. These conditions are also applied to the French buyers. This might seem severe but it is also an insurance for you.
 

French banking system (in very short!)

French property market did resist better the general crisis and property market crisis in particular because there is this rule of loan granted on the basis of your income and hence your repayment capacity regardless of other circumstances. This can be considered as a reality check and seems sounder than loans granted on the property potential value since when the property market collapses so does the financial system and the other way round. There was no such thing as subprime market in France and French banks have broader activities and very few are exclusively focused on investment banking or home loans as in the US or in the UK. Of course French banks have also suffered abyssal losses because they had bought toxic products from their foreign sisters. When French banks have an investment banking activity it is on top of their historical and traditional activity of bank of deposit. As a matter of fact, known as ‘universal banks’ their first activity was retail banking and diversification in other activities came afterwards, which was a strong support during the financial crisis.

UK loan

You can also take a UK loan but then the mortgage won’t be registered in the reservation contract and you will be considered as buying cash. It might be interesting to take a British loan now that interest rates have been drastically lowered and you will avoid currency exchange losses from £ to €, but then your UK bank may have you pay for that. Since your bank in the UK will anyway make payments from £ to € they will charge you a cost, and a cost maybe less transparent than if you do the money transfers yourself using a specialised company. Interest rates are low in France too at present but not as low as in the UK.

Buying for cash

If you are buying your French property for cash the only but crucial thing you have to consider is transferring your money in the best conditions bearing in mind the exchange rate fluctuations. You can do that with your bank but you should compare with currencies exchange companies. They will advise you as to the best time to exchange currencies and you might spare a lot that you may spend on decorating or furnishing your new French property. Even if this is quicker than asking for a loan it can take some time so take advantage of the period between the signing of the reservation contract and the signing of the deed of sale when you will be required to have your transfer and money ready.

Additional costs

Cost related to the purchase of any new build French property

To the property prices displayed for new homes (which automatically include the VAT which is not refundable) you will have to add the following costs:
- Conveyancing fees: around 3% of the property price paid to the notary when signing the deed of sale (as opposed to an average of 8% when buying a French resale property)
- Mortgage related costs:
- a mortgage registration fee of 1 to 1,5% of the amount borrowed, also called ‘frais d’hypothèque’ which are extra notary fees paid to the notary
- bank administrative fees (‘frais de dossier’) of 1% of the amount borrowed. Sometimes these fees are negotiable with the bank.
 

Costs of running your French new home

As owner of a French property you will have to pay an insurance, gas and electricity, maybe a TV licence for the French TV (called ‘redevance audiovisuelle’), water, rubbish removal and treatment and local taxes. There are 2 types of local taxes: a property ownership tax or land tax (‘taxe foncière’) that every owner has to pay and a residence tax (‘taxe d’habitation’) which is due by the occupant of the property. Local taxes are generally partly exempted for new build French property for up to 2 years. Local taxes vary from one town to the other and are based on the property surface and comfort.
You should bear in mind too that running costs of a new build French property will be much lower than for an older French property in particular for heating and a new build French property won’t be subject to structural works for at least 10 years.