Yes, you can afford it!
Worried about the financial commitment of a French property? Karen Tait finds ways to help you afford the dream...
1) Get canny with currency
If you need to buy euros for your property purchase, you can start saving before you’ve even looked for a property by managing’ exchange rates. What you pay for your euros translates to what you pay for your property – for example, if you were buying a house for €200,000 earlier this year when the exchange rate was 1.2, you would have paid �166,667, whereas at the rate at the time of writing of 1.5, you’d pay �133,333, saving around �33,000.
First of all, make sure you shop around; there can be a significant difference in rates offered by high-street banks and specialist currency companies, so spend a little time investigating your options.
You also have the option to spot’ or forward’ buy currency. With a spot contract, you buy currency on the spot’, at an agreed exchange rate. Clearly you’ll need the funds available at that time, but you don’t have to buy your euros all at once, you could break it down into several smaller transactions.
Forward buying currency enables you to fix a rate for a period of time, sometimes up to two years, thereby minimising currency risk. You might want to do this when you sign the initial sales contract, the compromis de vente, for example, so you know what rate you’ll pay when you exchange a few months later.
You could also enter into a regular payment plan; for example, if you’re making mortgage payments in euros, requiring sterling exchange. Also consider stop loss’ or limit’ orders, where you can fix a minimum or optimum rate; these can be used separately or combined.
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2) Downsize your dreams
If you think you can’t afford a place in France, perhaps you simply need to revise your plans and consider somewhere smaller or less perfect’. It doesn’t mean giving up on your dream home, but it could get you a foot on the ladder. Why not consider a studio or apartment, for example? It might not be the country cottage surrounded by vineyards that you dreamed of, but you’d still get a piece of the French lifestyle you long for. If you’re a first-time buyer in France, this kind of holiday home can work well for lots of reasons, not least from the low-maintenance and lock-up-and-leave angle.
Perhaps you think you need lots of bedrooms for visitors – but do you really? How often would you be there on your own, and how often with guests??When guests do visit, could they stay in a local B&B, hotel, g�te or campsite instead?
Likewise, do you really need a huge garden? Especially if it’s only going to be a holiday home. Consider how much work a garden needs to keep it in shape. Perhaps a courtyard or even a terrace or balcony would be fine after all.
You can always buy a bigger place in the future – maybe trade in the holiday apartment for a full-time home...
3) Location, location, location
Where you buy also has a huge impact on your budget. If you dream of the Riviera, but know you can’t afford it, why not head down the coast into Languedoc-Roussillon, where prices are considerably lower. Or if you’d always imagined buying in the Dordogne, you could hop over the border into Limousin where, again, househunters get more value for money.
In recent years, British househunters have searched further afield from the traditionally popular areas, sometimes creating new hotspots and capitalising on their purchase as house prices in the new areas rose correspondingly – another reason to extend your search parameters.
4) Bag a bargain
If you need a reason to buy now, rather than waiting just a bit longer, it’s surely to strike while prices are so low. It’s a buyer’s market but these things have a way of turning, and before you know it, all the bargains that have come out of difficult market conditions will have been snapped up. The last year or so has seen some incredible reductions in prices by vendors keen to sell, putting many properties at prices not seen in years. But prices are creeping up again, so don’t wait too long!
5) Brush up your bartering skills
For now, at least, most vendors are open to some negotiation on the price. That doesn’t, however, mean that you should just go in with a silly offer, you need to ensure you’re in the best possible bargaining position. To do this, make sure you’re an attractive proposition, as the price you’re offering might not be. Buyers who are in a position to move quickly – cash buyers, those with a mortgage agreed in principle etc – are more likely to have a cheeky offer accepted. It also helps if you’ve done your research; perhaps you can back up your offer with facts on other property for sale in the area – for example, are there any properties at a similar asking price that have been on the market for a long time, or properties at the price you’re offering that have sold quickly?
6) Renovate a ruin
Francophiles have long been fascinated by the amazing renovation projects available in France. Although the supply, especially in popular places, is not as plentiful as it once was, and the prices not as bargain basement, there are still lots of tempting projects on the market, some requiring full renovation, others a bit of updating.
Many British buyers have turned such properties into dream homes. Not all make it work financially though; let your head rule your heart and do your sums carefully to avoid costs spiralling. You don’t want the overall amount spent on the property to be more than its market value. That said, many people end up with a property done just as they want it and worth more than they have spent. You don’t have to do it all at once, you can do the work gradually and spread your costs.
7) Buy off-plan
If the thought of spending your spare time with a drill or paintbrush in hand makes your blood run cold, don’t fear. You could save money by buying a brand-new home too. New-builds have many benefits, one of which is lower buying costs (lower notaires’ and agents’ fees). What’s more, as you pay for off-plan property in stages, it enables you to spread out the payments. And, of course, there are no hidden costs as can often happen with renovation.
8) Get the VAT back
If you buy a leaseback property, you benefit from the above cost savings that come with a new property, and you also receive back the 19.6% VAT which applies to new property, which significantly brings down the sale price. What’s more, you’ll receive a guaranteed rental income from the leaseback management company, which could help with mortgage costs or act as an investment – indeed, many French
people see leasebacks as part of their pension plans.
9) Make the property pay
Many British owners couldn’t afford their Gallic home if they didn’t rent it out to help cover costs. There are lots of options, from a word-of-mouth system for family and friends to using local French agents, UK-based holiday home rental companies, or leaseback management companies. Consider long-term rentals as well as holiday lets – a longer contract may enable you to buy now while prices are low. As always, do your research carefully before you buy, to ensure you choose a property with strong rental appeal.
10) When in Rome...
You’re buying a French property; why not use a French mortgage? French rates are at an all-time low (from 2.3%), and canny investors are hoping to benefit from the struggling euro (recently affected by Greece’s financial crisis) by converting loans back to sterling within a couple of years. Overseas mortgage brokers have reported huge rises in applications over the past few months.
A French mortgage could also be the solution if you’re desperate to move to France but unwilling to sell your UK property until the market improves. You could buy a French property with a French mortgage at an attractive rate, live in the French property, rent out the UK property, and use the rental income to pay for the French mortgage. Then later on, when the UK market improves, you can sell your UK home and pay off the French mortgage.
Hopefully, if you thought you couldn’t afford a French property, you’ll be having a rethink now. After all, where there’s a will, there’s a way...