|
|
 |
Equity Release in France
What is equity release and why should I consider it?
Equity Release is a term commonly used to indicate the release of capital (the amount you own free and clear) from a real estate property.
Please note: this is not the same product as the UK Equity Release term commonly used. The French product allows you to release funds from your property that you will then pay back with monthly payments. It is not possible to have no monthly repayment until your death or the sale of your home, like in the UK.
In France you can release up to 75% of the value of your property in cash to use for other projects.
Please note: Due to the administration required, France Home Finance can only work on requests for Equity Release of € 50,000 or more.
Example 1
You own a 2nd home in the Dordogne worth 350,000€
You have a mortgage secured on this property with 120,000€ currently outstanding
 The maximum equity you can release is 350,000 * 75% = 262,500 less the outstanding mortgage of 120,000 = 142,500€
Note: if the mortgage you have on this home is not secured on the property itself but on another (for example, your home in your own country), you can release the entire 262,500€
Example 2
You own a leaseback in Chamonix worth 275,000€, there is no mortgage on the property;
The maximum equity you can release is 275,000€ * 75% = 206,250€
What types of projects can I use Equity Release in France for?
Many of our investor clients use Equity Release to come up with down payments for additional real estate investments. This is how you make your property and debt work for you to build your property portfolio and overall net wealth.
Example 3
You own a leaseback in Montpellier worth 195,000€
You have a French mortgage secured on the property with 109,000€ outstanding
The maximum equity you can release is 195,000 * 75% = 146,250 less the outstanding mortgage of 109,000 = 37,250€
you now buy a new leaseback for 190,000€ and use the equity release to cover the down payment and all sales costs.
You have just gained another property without spending any additional cash. Further, by using an interest only loan, the mortgage payments of your new property are covered by the rental income.*
* This example is for illustrative purposes only. Please contact
us for a free simulation for a specific project you are interested in using the latest interest rates available.
Other clients use Equity Release to fund renovation on their property, build a swimming pool, finance a dream vacation or give down payments to their children so they can get on to the housing investment ladder. The project options are endless!
Releasing equity can also be used as an income multiplier. For example, if you release 120,000 € in equity and pay a borrowing rate of 5.70% interest only but can invest that money at a higher rate of return with minimal monthly payments in the interim, you can make a very interesting net return on investment. This is another example of making your property and debt work for you to build wealth.
Some banks have a lower loan to value ratio if the use of the money is not verified (ex to buy a property, to buy a car). The maximum that can be borrowed without specifying the use of the money is 70% of the appraised value of your property.
Why Equity Release and not simply a personal loan?
It makes financial sense to release equity in your property, rather than
take out a personal loan as the interest rate is likely to be far lower
than that charged on a personal loan. Please do note however that the bank
will need to place an official claim on the property for the funds released
(called a “hypothèque”) and that this can only be done through a French
notaire. The fees and taxes involved are generally 1.5% of the amount borrowed.
How do I decide which product is for me?
Various Equity Release products are available on the market today - both interest only and repayment mortgages are available. Both fixed and variable interest rates are available. Variable rates track the Euribor (European interbank lending rate based on European Central Bank rates) plus a % bank margin. France Home Finance can work with you to explore all the options and decide on the best product for your project.
|
| |
|
|
|
| |
|
|
|
