France property mortgage

Some fortunate people are in the position that they have sufficient funds upfront to pay for both the property to renovate, and also for the renovation work itself.

For many others, the dream of renovating a property can’t wait until the funds exist, and the project needs additional funding. Therefore the problem of finding a mortgage and choosing the best financing method arises.

The following suggestions about French property mortgages apply mainly to those who are keeping their employment , and a home, in the UK during (and perhaps after) the renovation work. It would be difficult, probably impossible, to simply arrive in France without any employment and immediately get a mortgage to buy a run-down house to renovate.

If you live in the UK and have an existing property that is worth significantly more than the outstanding mortgage, and you can demonstrate that you have regular income, it should be reasonably easy to arrange a mortgage to buy your property in France.

It would be easier to buy a property that is already in good condition, but even for a ‘renovation project’ or ruin it is likely that funds can be raised, using surplus value in your existing property as security.

First you need to decide whether it is financially a good idea to use a mortgage to renovate in France. It is still possible in many regions of France to buy a ruin, and pay for the renovation work, and still end up with a property worth significantly more than the total layout. But lengthy delays, bad planning and significant overspends can all easily eliminate this gain.

Perhaps your renovation project will also cost more if you are not in the same country, since you will be relying on architects or project managers, who will need to be paid.
To be more positive, the project will probably go well, and you will be sitting on a large capital gain at the end of the project. So in principle you could sell the property and pay off the debts. Hopefully you won’t need to, and you will be doubtless be tempted to sell up your property in the UK and come to live in France instead, but it is reassuring nonetheless.

Mortgage and loan interest rates in both the UK and France have been low for quite some time now, and it is quite common to be able to fix a loan interest rate in advance for the length of the mortgage. This helps remove a significant part of the risk.

There are now some mortgage lenders and brokers in the UK who specialise in providing the best mortgage rates and flexibility to those hoping to borrow money to buy a property in France. I recommend you talk to more than one of these specialists, so you can hear a variety of opinions on the approach that is best for your circumstances. They willl not usually allow you to borrow more than 75% of the property cost, leaving you to finance the remainder of your property renovation project yourself, from available funds.

Lenders will not usually make funds available in advance of a renovation – so if you buy a ruin for £20,000 and hope to spend £80,000 on renovations, a mortgage lender is unlikely to offer you more than £15,000-£20,000 up-front. They may agree to release more funds as the work progresses, but this will need you to have access to funds to pay for the work before the mortgage monies are received.
One last consideration is the tax position. If you sell your property in France as soon as renovation work is completed, the usual tax applied is capital gains, but on a new-build house or a ruin that has been substantially rebuilt from an uninhabitable shell, it is usually VAT that will apply. see the finance section of this site for more information.

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