Thinking ahead to finances
If you’re considering buying a French property in 2014, now is the perfect time to start planning for it, says Jo Cowling - and putting finance first is a great start
As we approach the end of the year, the thoughts of many readers will be turning to what you will set out to achieve in 2014. Hopefully, for a large number of you, these aims will include moving ahead with a property purchase out in France.
However, you probably do not need us to tell you that this is not a quick and easy undertaking. Setting up and completing a property acquisition is always a complicated and time-consuming task. The matter is only further complicated by the fact that this may well be your first property purchase abroad.
The rewards of doing so are nevertheless considerable. It’s hard to rival the sense of joy that comes from taking ownership of your own little part of France, and from the contemplation of all the wonderful times you will spend there in the coming years.
THE TIME IS RIGHT
All of this means that buying in France is something that needs to be approached seriously, and now is precisely the right time to start planning your purchase. Estate agents should be contacted and viewing trips booked. However, in no aspect is the need to plan ahead greater than with respect to the financing of the purchase. Your purchase will go nowhere unless the necessary funds are securely in place to complete the transaction.
You may wish to take advantage of the excellent rates currently offered by French lenders to non-resident borrowers. Economic turmoil in the eurozone over the last few years has resulted in the European Central Bank reducing its benchmark interest rate. French mortgage rates have consequently dropped, and banks continue to price their credit competitively in order to attract borrowers.
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It’s worth noting that some banks have started to increase their rates for the first time in many years. While this signals an improvement in the French economy, it also means that borrowing rates are likely to rise as we progress into 2014.
Banks in France do not have access to UK credit checks, and therefore demand instead that British applicants send over detailed paperwork representing all financial assets, liabilities, income and outgoings. Such a file typically includes payslips or tax returns, rental agreements, mortgage statements, savings certificates and loan agreements.
The banks also ask that you send over three months’ worth of statements for all bank accounts held under your name, so that they can cross-reference the transactions and check they match the income and outgoings declared elsewhere.
This sounds like an arduous process, and let it not be said that applying for a French mortgage is a walk in the park. However, the banks are working to make the process quicker and simpler for applicants. Documents are now only rarely required in original form, meaning that this paperwork can be scanned and submitted electronically without delays. A reputable French mortgage broker can take more weight off your shoulders by helping you to assemble the application correctly and by then dealing directly with the bank on your behalf.
GOING IT A-LOAN
Finally, it should be noted that the banks are as suspicious of loans as they are keen on savings. The presence of credit outgoings is something that immediately sets alarm bells ringing among the underwriters.
This is not to say that there is anything wrong with applicants who reliably service existing loans on a monthly basis. But always think about how your use of loans will appear to the underwriters; if you have taken a loan out in the three months preceding the application, they will ask whether this was a necessary step in order to be able to afford the new purchase.
Hopefully this article has underlined the value of forward planning. Starting to take these issues into account now can only help to make the process of arranging a French mortgage as smooth as possible. Contacting a reputable French mortgage broker can also help to save time and money, and relieve much of the stress involved in the process. They will be able to expand upon the tips offered here by tailoring them to your own personal circumstances. This expert advice could end up proving to be the deciding factor in completing your dream purchase, setting you up for a very happy and triumphant 2014!
Jo Cowling is head of the French team at International Private Finance
Tel: 0207 484 4600