Financing your French Property Investment - Off Plan/Leaseback
Mortgage terms available
7 - 30 years
Deposit required for non-residents
20% of VAT inclusive purchase price (no obligation to use VAT reimbursement of 19.6% to reduce mortgage balance)
Mortgage Types
- Standard variable
- Capped
- Fixed
- Interest Only
Early Repayment Penalties
Fixed rate mortgages tend to have early repayment penalties, capped and variable rates do not. This is useful with a leaseback purchase as many clients use the VAT rebate of 19.6% to reduce the balance of the loan when they receive these funds within 6 months of completion of the property (if VAT has been paid by the purchaser rather than the developer direct, which is sometimes the case)
Leaseback
There are two very interesting features of French leaseback mortgages which are perfectly suited to the leaseback product.
Deferral Period
The investor can benefit from a deferral period at the start of the mortgage during the property construction phase. This can be from 6 to 24 months, even later in some cases. Whilst the property is under construction you do not need to make mortgage repayments, you will only pay the monthly life insurance premiums on the loan. It is possible to arrange a total deferral which means that both interest and capital repayments are deferred for up to 2 years and you make no monthly repayments at all (except the life insurance) during this period (any interest accrued is capitalised on to the loan, naturally). Alternatively you can arrange to defer only the capital borrowed, which means that during the construction phase you will make interest repayments on the loan only.
Interest Rate Fluctuations
With most French mortgages, if you have anything other than a fixed interest mortgage, the monthly repayments remain constant regardless of interest rate changes. When interest rates change it is the duration of the loan that will differ. Therefore if interest rates go up, the duration of your loan will increase slightly and vice versa if interest rates go down the duration of your loan will shorten. This ensures continuity for your loan repayments throughout the life of the loan, and no nasty surprises.
