There are a number of reasons for taking out a mortgage to
finance your property in France aside from the obvious
necessity for extra funds. Firstly it can be a good way to
invest even small amounts of capital if it is possible to
leverage a sizeable mortgage that will be covered by the
rental return of the property. Any increase in the value of
the property could reap great rewards on just a small
investment of say 10 or 15% of the value of the property.
Secondly you may have other priorities for your money such
as your own business investment, shares or renovation works
to your property that you view as bringing a greater return
on your investment. Thirdly, it can be a great way to
reduce the inheritance tax liability on your French
property by lowering its net value especially if the
inheritance rates are higher in France than back home.
Fourthly your mortgage interest repayments can be off-set
againts income tax thus lowering your French income tax
liability on your property.
Increasing your domestic (UK) mortgage
-This can be the easiest way to get your mortgage as there
will be far less paperwork and initial set up fees
-Money comes out of your bank account in the currency in
which you are paid thereby making it easier to forecast
your budget
BUT
-Interest rates in the UK are currently higher than those
on the continent so repayments could be reduced
substantially by raising the mortgage in France.
Getting a mortgage in France
-Interest rates are likely to be lower than current UK rates
-Your assets and liabilities will be balanced so that if
the mortgage cannot be paid you do not lose your home in
the UK, just the one in France.
-Your UK property will retain its equity so that it is
available if you need to use it to borrow money in the
future in the UK
-If your French home is rented out then you can offset the
mortgage repayments against rental income so that your tax
liabilities are reduced
-Inheritance tax can be reduced by taking out a mortgage on
your property in France as this will reduce its net value.
BUT
If you live and work in the UK then you are at the mercy of
exchange rate fluctuations so that if the Euro suddenly
appreciates in value you will have to make larger
repayments from your English account to cover the mortgage.
For example, if the Exchange rate moves from 1.6 to 1.4
Euros to the pound (an appreciation in the value of the
Euro) on a 200,000 Euro mortgage with an interest only
basis of 5% p.a. then annual repayments rise from
£6250 to £7143. The reverse can also happen but
you must calculate if you can cope or not with such
fluctuations. You can of course also enter into forward
contracts with currency specialists where you buy your
Euros up to two years in advance to protect yourself
against currency fluctuations.
What next?
If you decide that you do want to take out a mortgage in
France then we can help you by putting you in touch with
trustworthy mortgage brokers and banks who will endeavour
to offer you the best quote possible. This should be
arranged "in principle" before you set off to France in
order to avoid any untimely delays once you go ahead with
your property acquisition. Both fixed as well as variable
rates of interest are available depending on your financial
situation and although interest and capital repayment
mortgages over a 10 or 15 year period are the norm there
are also interest only mortgages available.
----------------------------------------------------
Leapfrog Properties is a French Property agency
specialising in sales across France and Niclas Dowlatshahi
is the Managing Director. Visit
http://www.leapfrog-properties.com to find out more.
No comments:
Post a Comment