UK or French mortgages when buying properties for sale in France?
After weeks of scouring properties for sale in France you have found the right home for you. If you need to borrow in order to finance your purchase you must consider whether you want a French mortgage or borrow the funds to buy French property from a UK lender.
A UK mortgage to buy French property
A bank will only lend money against a property in the same country. Therefore, you would need to re-mortgage your home in the UK to release equity for properties for sale in France. This obviously puts your main home at risk if you were to default on the loan.
There are advantages to funding properties for sale in France in this way. For example:- If you already have a UK mortgage then there will be no legal or Land Registry fees if you obtain a further advance. There may not even be a bank arrangement fee.
- Re-mortgaging to borrow a larger amount can sometimes result in paying a lower interest rate than you a currently paying.
- There is a more comprehensive range of mortgage products and greater flexibility.
- You may be able to raise more money this way than with a French mortgage on the French property.
UK banks in France offering mortgages on properties for sale in France
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. There may be other advantages and conveniences to going for a lender affiliated with your bank at home.
French mortgages for your French property
If you arrange to mortgage your property with a French bank there will be higher set up costs amounting to around 3-4% of the amount borrowed. French interest rates are lower than UK rates.
French banks will typically loan only 80% of the value (not purchase price) of properties for sale in France. UK lenders will re-mortgage a property for up to 95% of its value.
A French mortgage normally reduces the amount of inheritance tax payable when an owner dies by reducing the net value of your French property. A French mortgage will also reduce your liability to wealth tax in France .
If you are going to repay the mortgage from your UK earnings you will be exposed to major currency risk. This can dwarf the potential savings on interest payments because of wild fluctuations of Sterling against the euro.
Your individual circumstances will dictate whether a UK or French mortgage will be best for you. You must remember that taking a mortgage represents a huge financial commitment and think very carefully about what type is best for you.
It is recommended that you start the mortgage process prior to searching for your French property and seek qualified legal advice before you sign anything. Make the most of your overseas home and your by making the right choice about UK and French mortgages. The correct decision could net you thousands of pounds in savings and should bear this in mind when looking at properties for sale in France.
