|
|
 |
All information given on www.francehomefinance.com is
for general guidance only.
We encourage you to seek professional advice from experts on all questions relating to property law, inheritance law and taxation. Should you require advice on these subjects, we can put in you in contact with our trusted partners.
TAXES & CHARGES IN FRANCE
INSURANCE IN FRANCE
Back to Top
Why should I work with France
Home Finance?
France Home Finance is your specialist independent broker for French Mortgages serving non-residents and expatriates purchasing real estate and leasebacks in France.
|
You will have access to all the best French mortgage products with the lowest interest rates on the market, we work with more than twenty top lenders in France! |
|
Not only will you have expert advice to help you get access to and choose the best mortgage product – we also help you open your French bank account and guide you through the best way to obtain the obligatory life insurance for your mortgage. |
|
France Home Finance will act as your “general contractor” to coordinate communication between your mortgage bank, current account bank, real estate agent, notaire, architect, insurance agent and all other parties involved. |
|
You don’t need to worry about misunderstanding the process due to the cultural differences and language barrier. As you are buying in France, most banks provide all documents to you only in French. Our experienced bilingual advisors will clearly explain all the terms and requirements in English, as well as walk you through the process step by step. We provide this service to you for as long as you have your mortgage! |
|
You will save time, money and frustration: having backgrounds in French banking as well as banking in many other countries ourselves, we know how to navigate the French system efficiently and shield you from the typical problems caused by mismanagement of deadlines, lack of communication and last minute changes. A French banker may speak English but they still go home at the end of the banking day, whether or not your problem is solved! |
|
You will have peace of mind because we understand the concept of excellent customer service – you are our number one priority. |
Back to Top
Do you charge a fee for your services?
As an independent mortgage broker, we do charge a fee for our service. This is always quoted to you upfront and with full transparency. Our fee is success based and only due when we obtain the mortgage you desire and you accept it. This one time fee covers all the services described above for the life of your mortgage. Some brokers say they have no fees, but you can imagine they do not work without compensation. These brokers can make their living by channelling all their clients through a small number of banks to obtain a higher compensation from the banks. They are also motivated to work very quickly with a large volume of clients and therefore often do not have time to provide adequate customer service. You can also deal directly with a French bank that has English speaking staff to avoid a broker fee. The danger here is that the banker will only offer you their products and rates and they will do nothing more than the basic task of obtaining a mortgage. Do not expect detailed explanations, anticipation of problems, coordination with the other parties in the transaction or any kind of after sales service. Lastly, French bankers are frequently on vacation and go home at the end of the working day regardless of whether your questions have been answered or your problems solved.
Obtaining a mortgage offer is only one step of financing your project. As France is an administrative country with different business practices, long term customer service is needed to be sure things go smoothly.
We assure you that our fee is regained by the money saved in better interest rates and bank filing fees negotiated with our twenty bank partners, access to a large range of products to be sure you obtain the mortgage that fits your investment objectives and quality advice to be sure deadlines are met and costly mistakes are avoided – every step of the way.
Back to Top
I have the cash to buy my French property, why should I use a mortgage?
Many of our clients have sufficient savings to buy their French property in cash however it may not always be the best financial strategy. Here are five reasons why using a French mortgage might be preferable to paying cash :
- Save money on currency exchange
The euro/dollar or euro/pound exchange rate is not as favourable now as it was some time ago. Particularly if you buy in cash with dollars, you will automatically pay a large premium due to the exchange rate. By taking a mortgage in euros, you postpone the need to move the full value of your purchase into euros. Then, when the exchange rate improves, you can pay off your mortgage early if you choose.
- Save money by reducing your taxable rental income
Any rental income earned from your French property will have to be declared annually to the French tax authorities. You can reduce the amount of rental revenue declared by the interest paid on your French mortgage. This does not apply to mortgages taken in your home country for your French property.
- Save money with the low French interest rates
If you’re considering a U.K. or U.S. home equity loan to finance a French property purchase, keep in mind that French interest rates are approximately 2 to 2.5 percentage points lower. Your overall return on investment will likely be higher by opting for a French mortgage and retaining the rest of your capital in local investments.
- Increase your budget to buy with a French mortgage
If you plan to buy in cash but are not happy with the size, location or style of property to which your budget corresponds, don't make a compromise that you might regret. A French mortgage will help you increase your purchasing power and budget to make an offer on the property that’s really right for you.
- Reduce or eliminate your French “wealth tax” burden
You are legally obliged to declare the market value of your French assets to the government each year. This is why legendary French chanteur Johnny Halliday moved to Belgium…! If you’re not a French resident, you are subject to a sliding scale of 0.5 to 2% wealth tax on the net value of your assets in France including property, cash, investments and valuables. You have an automatic credit for the first 750,000€ in asset value (net of debt outstanding). If you find yourself with more than this amount in assets, you can reduce the market value of any property you own by the capital outstanding on your French mortgage.
Do contact us to learn more about French mortgages and to find out whether a French mortgage might be right for you. We’ll provide pre-approval to borrow analysis with absolutely no obligation. You may be closer to your very own pied-à-terre in Paris than you think…
Back to Top
What type of mortgages do you offer?
France Home Finance can assist you with classic mortgages, leaseback mortgages
with deferred payment until construction is complete, refinance mortgages
to optimise your interest rate and equity release of up to 75% of the value
of your French property. Products include repayment mortgages where you
pay capital and interest, interest only mortgages and combination interest
only/repay schemes. Both variable EURIBOR tracker rates and fixed rates
are offered. We can fix the interest rate for the entire loan duration.
Click HERE for more information on the various types of mortgages offered.
Back to Top
How long does it take to get a French mortgage?
Some websites will promise offers within a very short period of time however the reality in France is that the time to process your mortgage and issue an offer depends on your project, the current workload of the chosen bank and whether or not we are in a vacation period in France (French bankers have nine weeks of holidays!).
The process is as follows:
- Receipt of your complete application and supporting documents
- Confirmation of mortgage product and choice of bank with you
- Our team repackages your application in a way easy to understand (and approve) for the French bank and sends it electronically
- Supporting documents for the chosen bank are posted or emailed to you to complete and return (bank specific forms, life insurance application)
- Forms to open your French bank account are posted (choice of bank account depends on which mortgage bank is chosen – some oblige you to use their current account and some do not have current account capabilities in which case we offer an alternative)
- The mortgage bank’s risk engagement team takes a position on your file. Again this depends on choice of bank. Some of our bankers have decision power up to a very large loan amount and others need to send the file to headquarters if the loan exceeds a certain size. Sometimes the extra delay is worth it to get a better rate. We will advise you of all the options so you can make an informed decision.
- Once the risk decision is made, the bank account is open and insurance documents have been processed, the bank can print and post your offer. By law you must wait 11 days before you can accept and return it to the bank
- The bank will send funds to the notaire for the final act of sale within a few days of receiving your accepted offer
From the date we receive your complete mortgage application, we
can usually get a position on your file from the bank within the
week. Issuing the offer can take 2 weeks to six weeks (delay can
be added due to additional information requested by the bank risk
committee or for the life insurance). Although the process and
timing can vary we keep you updated at every step along the way
so you always know what the next step is and where you stand in
terms of deadlines.
Back to Top
What kind of property can I obtain financing for in France?
You can obtain financing for almost any kind of residential property on mainland France and Corsica, including new constructions, leasebacks and buy-to-lets. Restrictions may apply in the case of chateaux or properties needing extensive renovation to become habitable. Your home can be for personal or investment purposes. Purely commercial properties, such as vineyards or hotels, are not eligible for financing.
Back to Top
Can I finance renovation expenses for my new home?
Yes, it is possible to include renovation expenses in the mortgage for your new property. The bank will require estimates from licensed French contractors and will disperse the funds to them directly upon completion of the work. It is not possible to obtain funds to pay foreign workers for renovation with a classic mortgage however it is possible with an equity release as the funds released are for you to use as you like.
Back to Top
Can I buy property in France with my company or trust?
Yes, it is possible with some of our lenders for your foreign company, French company or trust to take out a mortgage in France however very few banks will do it and conditions change frequently. Please note that the parties on the title of the property must normally be the same parties on the mortgage so you cannot take a mortgage individually for a property your company owns. Also, the French lender usually requires the foreign entity to be a shareholder in a French SCI (civil property ownership company) that will buy the property. An SCI can take from 4 to 6 weeks to create so plan ahead. As a French SCI must have at least 2 shareholders, you may need to own some of the SCI shares in your own name.
Back to Top
How much can I borrow?
For classic properties, the norm is 80% however it is possible to borrow up to 90% or even 95% of the total of the appraised value of your home (not always equal to the purchase price), agency fees and renovation costs. Most banks do not finance the notaire fees (completion costs) for non residents.
For leasebacks, you can borrow up to 100% of the ex tax price including notaire fees. In some cases, depending on the leaseback program, it is possible to borrow up to 95% of the price including VAT. Please note that the larger the loan is, the higher the monthly payment will be and therefore the gap between rental income and the mortgage payment will be larger. This can be compensated by borrowing over a longer duration.
If you are a tax resident outside of Europe, North America and Australia, you may be required to pay a larger down payment.
We can obtain financing for both salaried and self-employed individuals however self certified revenue for mortgage applications is not yet accepted by French banks.
As a guideline, your new mortgage payment plus other monthly credit payments should not exceed one third of your gross monthly income. If you are married, your spouse’s loan payments and revenues are taken into account.
Back to Top
Is there an age limit to obtain a mortgage?
You must normally be between 18 and 65 years old at time you apply for
your French mortgage to qualify to apply for the obligatory French life
insurance. Ideally your mortgage must end before your 75th birthday as
the life insurance becomes very expensive after this date. It is possible
to obtain a mortgage without French life insurance if :- you are able to obtain an Irish, US or UK life insurance policy to cover the amount of the mortgage where the bank can be named as the beneficiary as long as the mortgage is outstanding
- you are willing to put a down payment of 40% or more on the property or
- you are willing to let the bank manage a sufficient amount of investments for you (stocks, bonds, funds) and sign over those investments to the bank to pay off your mortgage if needed in the event of your death
Back to Top
Why do you have to pay for a French current account, how much is it and when do you start paying?
To issue your French mortgage,
you are required to open a French bank account from which
your mortgage payments can be debited. The bank will not
print your offer until the account is open. « Checking » or « current » accounts are not free in France as they are in many other countries. Despite all of our bank contacts, all of the FHF team members pay a fee for our current accounts.
You have two options for your account fees 1) a la carte and 2) package. A la carte fees mean you pay for what you use. This can sound appealing at first as many of our clients simply need the French bank account for their mortgage payments and possibly rental deposits. Based on previous clients’ experiences, by the time you pay a transaction fee for every direct debit, the fraud insurance which is critical and other transaction fees, the package fee is less expensive and offers a better service. Package fees range from 8 to 9 euros per month and include fraud and theft insurance for your account, internet banking, a check book, free direct debits and a debit card that can be used to access money in your account. Clients often say they don’t want the debit card. This is not a problem however the package fee would not be reduced by not taking the debit card. The monthly payment for the account begins as soon as you open it. The minimum deposit to open the account is usually 1500€ however
this can be negotiated.
Back to Top
11. Does equity release exist in France? What can I use the equity for?
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. In France you
can release up to 75% of the value of your property in cash
to use for other projects. 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. 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! 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.
Click HERE for more
information on Equity Release
mortgages offered.
Back
to Top
What is an SCI?
An SCI (société civile immobilier) is a company established under French law, which is set up to manage and rent out property. If the property is purchased by an SCI, the members of the SCI own shares in the company, which then owns the property. Families will often set up an SCI together to be able to easily pass shares between members of the SCI, especially in the case of death of one of the shareholders. This is important as your property is subject to French inheritance law whether or not you are a resident of France or if you die in France. For example, if a couple have children and one spouse dies, French law dictates that 50% of the property must automatically go to the children. If the couple prefers all of the property to be left to the surviving spouse, an SCI is a solution.
SCI’s are therefore particularly interesting ownership vehicles for non-residents buying property in France. The cost to set up an SCI can be approximately 2000 € and the company must have its own bank account and file an annual general assembly report. It’s
important to obtain sound legal advice if you plan to purchase through
an SCI to be sure you will be able to take full advantage of the
benefits, and to correctly structure the purchase and the loan. Either
a notaire or a French solicitor (lawyer) can set up an SCI. Please
note that the SCI must be named on the compromise de vente (or reservation
contract in the case of leaseback), must be set up before your obtain your mortgage offer and must be named on the property title. If needed, France Home Finance can put you in touch with experienced legal advisors who can advise you on the pros and cons of an SCI for your situation.
Back to Top
What is a Leaseback?
Leasebacks are freehold real estate
developments sold “off plan” (before they are built) that
come with a full management contract for 9 to 11 years that
guarantees an annual rental income of 3 to 6% of the price
of the property after all charges. They are rented out short
term as fully furnished and serviced apartments and studios.
Leasebacks have been around for over twenty years. They are
often multi-unit student or resort housing and are located
in areas the French government wants to develop. As an incentive
to this end, the investor can reclaim the 19.6% VAT paid on
the property after construction is complete. An important
note, in France off plan projects are paid for by a series
of stage payments as soon as construction begins. This is
different from many other countries where the buyer pays for
the property only upon completion of construction.
Some advantages:
|
The yield of 3 to 6% net of all costs represents a better return
on investment than many conventional properties. |
|
You can increase your return on investment by using a mortgage to finance your leaseback investment. There are also tax advantages and deductions that apply when you use a French mortgage to finance your property.
|
|
Many programs allow you to use your leaseback property at a discount. |
|
If you hold your leaseback at least 15 years, you will have no capital gains tax to pay in France when you sell. |
|
Another tax advantage: leasebacks have 2 years
exemption from tax on property (also called land tax or “Taxe Foncière”.) |
|
The required deposit is lower than for a resale property (5% instead of 10%). |
|
The notary fees are lower (between 2 and 5%) than for a classic existing property (between 6 and 8%). |
|
The 9 to 11 year guaranteed rental return with full management is ideal for the out of country investor – no hassles! |
Some disadvantages:
|
The VAT must be repaid on a pro rata basis if you sell your leaseback property before 20 years time. |
|
As the entire building is managed by the same company, you are counting on that company to stay in business for the duration you hold your property so be sure to check out the company credentials or buy from a sales agent who has done this for you. Before agreeing to finance any leaseback property, French banks will investigate the management company. You can feel reasonably confident about the management company if banks are willing to lend money to investors for the project. |
|
Resale of a serviced, furnished leaseback apartment in a resort complex or student area is not as straightforward as the resale of a conventional apartment. The buyer population may not be as large. |
Back to Top
Who is the notaire and what does he/she do to help complete the purchase of my property?
A Notaire is the most qualified solicitor (lawyer) in the French legal system, studying seven years to obtain their degree. The notaire is both a Public Officer and a legal counselor in specific areas of the law, including real estate, family and corporate law.
The notaire has the power to authenticate certain agreements, such as real estate sales, which cannot be enforced by any other means. The law imposes a broad personal liability on the notaire for professional acts. Notaires subscribe to a common insurance, which provides an immediate financial guarantee to the client in case of their error. Thus you have the security of working with a specialized lawyer to ensure that your transaction is property completed. Please note that the notaire does not ordinarily provide legal advice on the transaction.
Back to Top
What and how much are the notaire fees?
"Notaire fees" is the term given to all the taxes and registration
charges that a buyer incurs when purchasing a property. Usually this
amounts to between 6-8% of the purchase price, depending on the price
of the property for an existing property. These fees consist of tax on
the purchase, costs to register and authenticate certain documents, putting
the “mortgage” or “lien” on the property, costs
to verify certain matters related to the purchase, and the fees to the
notaire for doing this work.
The notaire fees are approximately 5% of the purchase price including tax
for leasebacks and from 3-5% for a new construction or a property less
than 5 years old.
The notaire fees are fixed by law. Neither the notaire nor the clients
may modify these specific fees. Be aware that, if there are two notaires,
the fees are shared between them. Thus retaining your own notaire will
not increase the professional fees. For classic properties, it is advisable
to have your own notaire, so that he or she is working on your behalf and
providing you with advice on the transaction. France Home Finance can put
you in contact with English speaking notaires who can expertly guide you
through the buying process.
While for most buyers the notaire fees seem shockingly high, it is worth
remembering that annual property taxes in France are substantially lower
than in many other countries. For example, U.S. property is taxed anywhere
from 0.5% to 3% of the value of the property annually however the French
property tax ("taxe fonciere") is about 0.1 to 0.2% per year.
After only a few years of ownership, you will more than make up the difference.
Back to Top
Can I buy a home with the intention to rent it out?
Yes you can but your future rental income will not always be taken into account when calculating your total capacity to borrow.
Back to Top
What do I need to know about French inheritance law?
It’s important to educate yourself on the way inheritance works in France. If you own property in France, your estate will be subject to French inheritance tax even if you die in another country. In some cases a tax treaty between your home country and France may prevent beneficiaries from being taxed twice. The French system is different in that French law insists that inherited properties are divided equally among the immediate family members. For example, if a married couple has two children and one of the couple passes on, half of the property goes to the surviving spouse and the other half is split evenly among the children. This means that a spouse cannot leave all of the property to the surviving spouse. Imagine how complicated it can get in the case of divorce, remarriage and a second set of children. In the event of a sale, all parties must agree. There are of course solutions to this issue. One example is that you can purchase the property in the name of a Société Civile Immobilière (SCI). If you do plan to purchase with an SCI – decide this BEFORE you make the offer on the property as it takes time to set it up. The SCI would also be the borrower on the mortgage. This must all be done in advance as it is difficult to buy as individuals then sell to an SCI at a later date. Sometimes executing a contract between spouses is enough to accomplish the desired result. In any case, it’s
best to consult a French notaire who can provide advice specific to
your situation.
Back
to Top
What are the pitfalls to watch out for when obtaining a French mortgage?
Based on the experience of our clients, here a few tips :
|
Let us know about any serious health issues you have up front. This could affect our strategy to help you obtain the obligatory French life insurance at a reasonable rate and meet the deadline required. Remember that we do not know what rate you will be charged until the insurance company studies your full application and health information. |
|
In some countries it is possible to use retirement funds to invest in real estate. If your fund requires anyone but you as an individual to be listed as the owner of the property, it is possible to obtain a French mortgage however the number of banks who offer this type of mortgage are limited. |
| Remember important deadlines: |
|
Once you sign a reservation contract, promesse or compromise de vente, you have seven days to retract and get your deposit back. After that, you can only get out if your clause suspensive is fulfilled otherwise you lose your deposit. It usually takes a minimum of two bank rejects on the exact lending conditions stated in the clause suspensive for the notaire to refund your money. Banks are not allowed to provide a reject letter unless they have fully studied your application. If a bank did not have time to come to a decision, they will not provide a reject letter so be sure to get your applications in early. |
|
For classic properties, once you sign the reservation contract,
promesse or compromise de vente, you typically have 30 to 45
days to obtain financing or activate your clause suspensive.
Since the banks can take anywhere from 3 days to 6 weeks to study
a mortgage application) you need to get your application in as
early as possible. |
|
Once you have accepted a mortgage offer, you typically have
4 months to complete the sale. After 4 months, the bank is not
required to honour the terms. |
|
 |
Ask your notaire about inheritance implications. This is especially important if you are divorced and remarried with children. |
|
Remember, a notaire is not obliged to act as your solicitor/lawyer to represent your best interests. Their job is to carry out the act correctly. They are very knowledgeable individuals that can answer almost any question you have however you need to know what questions to ask. For full protection, you may want to engage a solicitor/lawyer to represent you in your transaction. |
|
The tax implications between France and other countries are complicated.
Be sure to seek professional tax advice to be compliant and to take
advantages of all deductions. |
|
If you plan to rent out the property you are purchasing, do your
homework up front. Who will rent it out for you? Do they have good
references? What will you do if they go out of business - are there
enough other qualified companies in the area to take over? What legal
implications do you need to be aware of? For example, how to end
the lease if you want to use the property for other purposes. It
can be very difficult to manage a rental property from abroad if
something goes wrong with your management company and you are not
ready with a back up plan. |
|
Get the update on the down payment required and final closing
costs from your notaire as early as possible so you have enough advance
notice to arrange your funds. |
|
We recommend depositing a minimum of 3000€ in your French
bank account when you open it. Your account will be direct debited
for the mortgage bank fees before the bank will release funds, the
monthly life insurance payments and eventually the mortgage payments.
Due to the multiple parties involved with interdependent processes,
it is difficult to know exactly when all of this will happen. The
best is to put the money in the account as soon as possible. It is
possible to open your account with less money however you must then
remember to frequently check the balance to be sure you don’t
go into overdraft and incur fees. |
Back to Top
TAXES AND CHARGES IN FRANCE
What other charges should I be aware of when buying home in France?
For apartments or condominiums, you can expect to pay “charges de copropriéte”.
These are monthly or quarterly maintenance and service charges that
relate to the common areas of the building.
Back to Top
What French taxes must I pay if I live in France and am a tax resident of France?
Many people are surprised to learn that if you are a tax resident of
France, you must declare all your worldwide income and assets, no matter
which country the income was earned in or where the assets are held.
The various types of income will be treated and taxed differently based
on the country of origin. There are many tax treaties in place between
France and other countries to avoid double taxation.
Back to Top
What French taxes must I pay if I live abroad, am a tax resident abroad but have French assets such as property?
You only have to declare income from French sources and your assets
in France to the French tax authority. Examples of taxable French income
include: - Rental income from French property
- Income from stocks or bonds invested in France
- Capital gains on sale of property
- Inheritance tax on transfer of ownership of property (even if you die outside of France)
Besides income tax, you should be aware of ISF or “impot sur la fortune” – this wealth tax is applicable to the value of all of your assets in France less any debt against them. The wealth tax begins on any net assets amount over 750,000€.
If you own real estate, you will also be responsible for “taxe foncière,” or the land tax. It is payable the last quarter of the year. This expense is often split between the buyer and seller in the case of a mid-year purchase.If you live in the property, you will also be responsible to pay a “taxe d’habitation” which covers services and maintenance provided by the local government. If you rent out the property, this tax is usually recharged to the renter. This tax is also payable the last quarter of each year.
For leasebacks, VAT is a consideration. To encourage development of certain types of furnished rental housing, the French government refunds the 19.6% VAT for properties that qualify as leaseback. This can be claimed upon completion of construction of the property. It must also be repaid on a pro rata basis if the property is sold before 20 years time. The leaseback owner must also collect VAT on the rental income received and repay it to the French government. The management company deals with collection the VAT and the owner must then file an annual VAT declaration.
There are many tax treaties in place between France and other countries to avoid double taxation. Please note that this is not a complete list. Do consult a tax expert for thorough professional advice on the subject. We are happy to recommend one of our trusted bilingual partners per your request.
Back to Top
What tax deductions can I claim for my French income tax?
Income from rental properties in France can be reduced by the following
expenses :
interest paid on your French mortgage, renovation expenses and land
tax (taxe foncière). For furnished rentals you can also deduct notaire
fees paid for completion of sale and bank filing fees.
Back to Top
Which tax forms do I need to file?
This list is no replacement for professional advice however it does
provide you with an overview of forms that commonly apply to our customers
:
- Form 2042 is the main tax from used to declare your worldwide income
- Form 2042 C is an additional form used when you have rental income from
furnished property, if you have paid any tax in another country that
can be offset against French tax or income from a personal business.
Back to Top
I live abroad and I own a property in France that is not yet completed or rented out in the tax year concerned, do I need to complete an income tax return?
Absolutely, do complete the French income tax return with a declaration
of no income so you can still deduct expenses incurred in that tax year
for the property such as interest paid on a mortgage, notary fees, land
tax and renovation (not all deductions are listed here.) You can then carry
forward the losses to apply when you start gaining income. This also applies
to French residents that have a rental property but have not rented it
out yet. If you do not file a tax declaration in the year the expenses are
incurred, you lose your deduction.
Back to Top
Which French tax declarations need to be completed for a leaseback?
| 1. |
When you purchase the property,
you must inform the French government that you have purchased a
leaseback and that you want to renounce the tax exemption (“franchise
en base”). |
| 2. |
Once the construction on the property
is complete, you must request a reimbursement of the VAT. It takes
from 3 to 6 months to then be paid. Normally this is debited directly
into the French bank account you have opened. |
| 3. |
VAT declarations must then be filed each
year to declare the VAT you have collected on your furnished rental
income and then repaid to the French government. Often the developer
of the leaseback program will designate a bilingual accountancy
firm to handle all VAT filings for the buyers. We are also happy
to recommend one of our trusted bilingual partners to assist you
with these filings per your request. |
Back to Top
INSURANCE IN FRANCE
What are my obligations regarding home insurance?
When you have a mortgage for your property, the bank requires you
to have a home insurance policy to cover damage and loss for your
property (if your property is an apartment, the common areas of the
building are covered by another policy taken by the “co-propriete” or
owners association). For classic properties, this policy must be in
place before you complete the act of sale with the notaire. For leasebacks,
in most cases the management company for the program takes out the
policy. This would be mentioned in your lease contract. The cost of
home insurance is quite reasonable in France, a few hundred euros
per year and the policy can be put in place quite quickly. We are
happy to recommend a reliable insurance agent should you need to insure
your property.
Back to Top
Why must I obtain life insurance for my French mortgage?
The French do not believe in leaving debts behind when you go. All
French banks will require a life insurance policy linked to your mortgage.
The policy will pay off the remaining balance of the mortgage in case
of death. When there are multiple borrowers this insurance can be
split between borrowers, usually in proportion to revenue earned.
For example, for a purchase of 200,000€ - if one person in the couple earns 40,000 and the other person earns 60,000, the life insurance coverage could be split 40% - 60%. The first person would be covered for 80,000 (40% of the loan value) and the second person for 120,000 (60% of the loan value) in case of death. If the first person died in this case, 40% of the remaining balance of the mortgage would be reimbursed. This is the minimum coverage required. Some clients prefer to have 100% insurance on each borrower so that the entire remaining balance of the mortgage is repaid in case of death of either party.
Most banks offer a group negotiated insurance policy that is often the least expensive option. It’s
also possible to obtain an individual policy. We can compare pricing for
you in both cases to help you choose the best policy for you. To apply
for the life insurance, you must complete a health questionnaire so the
insurance company can assess if you fit into the standard group rates or
if you would have any health issues that could merit an increase in the
insurance premium. Any serious health issues must be declared at this time
to ensure a payout in case of death. If one person in the couple has a
health issue or is difficult to insure, we can often negotiate a higher
percent of coverage on the other person to avoid paying a surcharge on
the insurance premium. Some banks will accept an Irish, UK or US life insurance
policy in lieu of a French one. The policy amount must be enough to cover
the mortgage amount and exchange rate fluctuations (usually 15% more than
the loan amount if the policy is not in euros). It is also possible to
obtain a mortgage without life insurance if your down payment is at least
40%.
Back to Top
When do I start paying the life insurance?
Life insurance premiums are charged as soon as the bank receives your accepted
mortgage offer – please note that this is before the actual completion
of the act of sale with the notaire. They will directly debit your French
bank account, normally on a monthly basis unless you specify otherwise.
If you reimburse your French mortgage early, you can cancel the life insurance.
Back to Top
|
|
|
| |
|
|
|
