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A solution to the exchange rate penalty for Americans buying in Paris!

Bonapart's long-term mortgage partner, France Home Finance have informed us of a new bank product that solves the exchange rate penalty for Americans or Brits buying in Paris.

The buyer borrows 100% of the purchase price and the bank requires 25% of the loan amount to be placed in a portfolio as a bond (the client can’t withdraw the funds while the mortgage is outstanding but keeps any gains on investment generated). If the buyer wishes to finance the notaire fees as well, the deposit needs to be 33% of the loan amount.

"Am I allowed to buy property in France?"

By Samina Arnoult of Samina Arnoult Global Financial Services

The answer is a straightforward yes, and no strings attached. This is so true that foreign real estate companies buy French real estate every time the market plunges.

The second question that comes up is about financing property in France. Too often, foreigners do not know that they can get financing from French banks and often it is worth considering, especially when interest rates are lower in France than in their home country.

Discussing the Dollar - the time is now!

Flavour of the month is the drop in the dollar. I'm constantly emailed by clients and those poised to invest here who are teetering on the edge but waiting for the dollar to improve. Sadly for them, as Moloko said, the time is now. En mon avis and plenty of finance professionals, it looks like it won't and by the time they make the plunge, the Paris property prices will be on the move.

I read on Bonjour Paris this week that New Orleans, native Timothy Ramier, a specialist in International Tax, Trust & Estate Law says, ‘People are waiting for the Paris real estate market to take a dive, but it appears to be more rumor than reality. Compared to London, New York, Tokyo, Moscow and some other major cities, Paris real estate is a bargain.”

This I'd have to agree with and since we have our very own Maggie Thatcher (in drag of course) it's highly unlikely that his free market reforms are going to have anything other then a positive effect on property prices.

Ramier agrees with me: “Sarkozy promised the French a change and that’s what they’re going to get. People are upbeat that the new President is going to give a major boost to the economy. “

Your mortgage acceptance as condition of the Promesse de Vente

In the Promesse de Vente we usually request that the purchase be subject to a conditional clause (“clause suspensive”) which lays out the minimum terms of a loan that you are willing to accept to purchase the property. Ordinarily you will have 45 days from the signing of the preliminary sales agreement to secure that financing. If you are unable to do so (in the preliminary sales agreement you obligate yourself to try) the agreement is automatically cancelled.

You are therefore excused from purchasing the property and your 10% deposit is refunded.

Not surprisingly, sellers are not too keen on this clause and it can be a bargaining mechanisim if it does not appear in the Promesse de Vente for example if you are buying but not financing the purchase with a loan, if you are financing with a mortgage obtained outside of France (which this rule does not cover) or you agree to drop the clause to obtain a better price in negotiations over the overall price of the property, which can be advantageous.

Obtaining a mortgage in France

Obtaining a mortgage here in France is very doable. More and more banks offer loans to non-French residents and foreigners living in France. There are numerous financing options and these can get mind boggling so we suggest you work with our professional mortgage partner France Home Finance to ensure that you and are led smoothly and effortlessly through the borrowing process. The loan approval process takes about 3 to 4 weeks once all your documents are in to the bank.

With France Home Finance you can also have your financials evaluated to determine your budget even before you begin your search. This is a real bonus because none of the banks will give pre-approval as they will need to go through the process again after you find the property. We prefer you do this before we even start to try and locate your perfect property so this is another reason we believe France Home Finance offer an extremely valuable assistance. Dealing direct with a normal bank you will be able to get an idea of how much you can raise and after the Promesse de Vente is signed you go back to the lenders and fix the mortgage offer (with your fingers crossed they are going to cough up the dosh now that you've found your hearts desire!).

The paperwork and requirements to obtain a mortgage are fairly simple, if longwinded. You will fill out a multi-page application, plus an insurance questionnaire (a verified physical exam may also be required). Each institution may also have its own special forms to be completed.

The starting point to determine this is your income. The monthly amount of the mortgage cannot be more than one-third of your monthly income. If the apartment you are purchasing expects some income from rental, then this can usually be applied.

You can obtain financing for 10, 15, 20 or 25 years at variable or fixed percentage rates (depending on your age up to 75). The most popular mortgage programs are fixed, variable, multi-option and interest only.

Spend Spend Spend like Viv

The iconic Viv Nicholson - Heaven Knows She's Miserable Now.........

I just heard from a client today that Abbey National in the UK have recently
announced a whopping borrowing limit of 5 times your salary! Whoah.

It's quite hard for UK and American borrowers to understand the cautious approach of French banks. In fact the French have a completely different attitude to borrowing and lending than us spendthrifts. Here in France, one doesn't really live beyond one's means. If you don't have the money, you don't buy the shoes or you stay at home on a Saturday night! Very few people have credit cards. (I still have mine but I don't really use them now - I like them for emergencies, I am an entrereneur you know, we need these things. I remind myself that Michael Moore made most of his movies on cards if the going gets tough.)

In the UK most people have credit cards and store cards (Harvey Nichols and Selfridges are the good ones in London) - average household debt in the UK is £8,582 (excluding mortgages) and £50,918 including mortgages. The average owed by every UK adult is £26,747 (including mortgages). This grew by £225 last month.
Stats from Credit Action.

Here in France it's a bit tougher, you have to really prove you can afford it before you borrow, you must earn three times the monthly repayments when taking a mortgage and here are the documents required for the application (Thanks to Samina Arnoult of Samina Arnoult Global Financial Services for this list):

• Identity card, passport etc. proof of identity
• Pre-sale agreement/Promesse de Vente or details on proposed real estate project
• Marriage or divorce papers, if divorced
• Marriage contract, if there is one
• Last 2 income tax returns - or more if you are self-employed
• Last 3 full months of bank statements
• Details of other loans and statements (tableau d'amortissement)
• Proof of down payment (normally 20% of purchase price)
• Proof of notaire fees (normally 7-8% of purchase price)
• Proof of incoming rent if you have rental property
• Title deeds of all your properties
• Your rent slip, if you are renting
• Your last 3 payslips if employed
• If you are self employed or own a company, your by-laws, company registration and last 3 years of balance sheets
• If you'd like to renovate and finance this also, quotes from the builders
• If the property you are buying is for rental you need an estimation of future rent from an agency or the current lease if property is already rented
• Statements of all your assets (funds, portfolios, savings accounts etc.)

Phew. If you are not an organised person you better get yourself in order when you decide to carry out business or buy property in France.