The French leaseback scheme and French property mortgages
Around 5 million homes in France are privately-owned but rented out. Specific buy-to-let French property mortgages not covered by the French leaseback scheme do not really exist. The French leaseback scheme offers great opportunities as French investment property.
The French leaseback scheme was introduced by the government over 20 years ago as a way increasing the quality and quantity of holiday accommodation in tourist hotspots. Houses bought under this scheme represent good-performing French investment property and banks offer French property mortgages tied to leaseback properties.
French property mortgages on a buy-to-let basis
Banks will take the decision whether to offer a French property mortgage on the basis of ability to service the loan and not potential rental income from the property. A French property mortgage will have a loan-to-value of no more than 70 to 80%.
French property mortgages are usually for a period of between 15 and 25 years, depending on the sum borrowed and the individual bank offering the loan.
French property mortgage lenders offer both fixed rate and variable rate loans with the former type based on the Euribor (European Inter Bank Offer Rate). The Euribor interest rate can obviously fluctuate but is generally lower than the bank of England rate. Fixed rate French property mortgages are generally more expensive but offer greater stability.
Buying French investment property with a French property mortgage
Taking out a French property mortgage can represent a fantastic investment opportunity. By putting down a large deposit on your French investment property you are likely to receive a better rate of interest on your French property mortgage. You may have never previously considered buying a holiday home but the French leaseback scheme, and guaranteed rentals, means there are several financial reasons to do so.
Many investors opt for an interest-only mortgage although repayment French property mortgages are far more common. Fixed rate and variable rate mortgages are both available.
A 60 to 70% mortgage will probably be covered in full (capital and interest) by rental income. However, you must remember that the bank will not take this into consideration when deciding whether to offer you a French property mortgage.
UK banks offering mortgages for French investment property
Re-mortgaging your UK property to release equity is another way you can finance the purchase of your buy-to-let French investment property. UK banks offer a far greater range of mortgage products and specific buy-to-let loans.
There are also UK banks with French branches that have introduced more features of UK mortgages to the French property sector whilst still offering low European interest rates. Your mortgage will be secured on the French property and, whatever happens, your UK assets will be safe.
French investment property bought under the French leaseback schemes
The French leaseback scheme is government-sanctioned and offers tremendous buy-to-let investment opportunities. Buying a leaseback home with a French property mortgage is financially attractive to many buyers.
