Buying Property in France

View our video showing how to save money on your payments to France

For example, let’s look at buying a property in France for €250,000 in July 2012, when the Euro exchange rate was around 1.27. That gives a sterling equivalent of £196,850, so you might imagine that your 10% deposit would be £19,685, with a completion amount of £177,165 in October.

The problem that summer, was that the Euro rate fell back significantly after July, and by October was sitting around 1.22. So in fact that completion amount in sterling, would have risen to £184,426 – an increase of over £7,000 extra to find for that completion payment.

By fixing an exchange rate in July when the deposit payment was made, this risk would have been eliminated. Using a Forward Contract does require a 10% deposit, but the remaining 90% of your sterling is not tied up for the intervening time – very useful if you want to fix an exchange rate, but are awaiting proceeds of a property sale for example, to fund the bulk of the completion payment.

The phrase we hear most often when we are asked about fixing exchange rates, is “I would never buy a property in the UK without knowing the price, so why would I want to do that when buying in France?”. Fixing an exchange rate is also much simpler than it sounds, and a reputable currency specialist will be able to talk you through the options without any jargon, so you can decide the best way to buy your currency.

It is a necessary evil that you will need to exchange a large amount of sterling to Euros when buying in France, yet it is an element of the purchase that many people still leave to chance – and end up paying more as a result.

To see how much difference the exchange rate makes over a period of time, here is the approximate cost of €200,000 over the last 5 summers:

The table shows that as well as getting a good exchange rate on any particular day, timing is also important – if exchange rates are low, there is no way to magically make them better. While unfortunately nobody has a crystal ball, at least knowing which way rates are moving and why, will allow you to make an educated decision as to when you secure your exchange rate, rather than taking a chance on a potentially expensive last minute transfer. Contact us at Currency Index for more information and an informal discussion around your options.

Useful Links – Sending Payments to France

Currency Brokers: www.currencyindex.co.uk

Mortgages for French Property

If you are taking a mortgage when buying property in France, things (initially at least) will be slightly more complex.

First of all, you will need to decide whether to take a Euro (French) or Sterling (UK) mortgage. Your choice will be limited by your circumstances – if you are remortgaging a UK property to release equity then you can organise this in the UK, but if you are taking out a French mortgage, you will likely be dealing with a French lender.

Don’t forget with a Euro mortgage, while interest rates may currently be lower than in the UK, you will have to repay a fixed Euro amount each month. If your income is still sterling-based, you are therefore open to exchange rate risk over the term of your mortgage. While the cost of a few hundred Euros per month might not change significantly from month to month, over a period of years the exchange rate could move significantly against you or in your favour, making your monthly sterling payment amount quite different – something to consider if you don’t have a lot of room for manoeuvre in your monthly budget.

The most important element when borrowing in France will be the ability to prove your income. You will need to prove that your income is 3 times your debt repayment obligations, and life insurance is also mandatory on many French mortgages. Typically you will be able to borrow up to 85% of the property value, from 5 to 25 years, and you will need to pay the deposit and Notaire costs of course. Fixed, and variable loans are available, but you will struggle to find interest only or and buy-to-let products that you might be offered in the UK.

Knowing which lenders to approach will need some research. In France there are national banks, local mutuals, the nationalised Banque Postale, and international banks such as HSBC and Barclays – although surprisingly there is sometimes very little link between a UK high street bank’s operations and its French counterpart, meaning there is little advantage if you are a customer of the UK operation.

Mortgage brokers will also be able to advise, and there are plenty of UK-based companies who speciliase in helping you apply for loans, depending on your own detailed circumstances and requirements. Make sure you check for any fees, but also bear in mind that the broker may be able to get you a better deal than you would get by approaching a lender directly.

Once you have a mortgage offer, you can use it as proof of your ability to buy property (you are ‘proceedable’ to use a UK estate agent term) which will help you when viewing properties. The mortgage offer must be open for at least 30 days, and it is worth knowing that married couples or those in civil partnerships are jointly responsible for a mortgage, whichever partner’s name is on the paperwork.

Finally if you are taking a Euro mortgage but still have UK income, speak to a currency broker to make sure you set up the most efficient way to transfer money to your French account ongoing. Bank charges and poor exchange rates can easily push up the cost of your property over the course of a mortgage, even with a difference of a few pounds per month.

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Buying Property In France: Moving In, Letting Out, & Ongoing Bills

Your estate agent will be likely to offer you a ‘furniture pack’ which will give you all the basic furnishings, fixtures and fittings for your new home if you are starting from scratch when buying property in France. Odds are you will want to spend some time shopping locally too, but if you want to move in quickly and are not bringing a house-full of possessions with you, then a furniture pack can be a good place to start. Check for value and make sure you don’t pay over the odds, as your property agent may well be paid a commission if you use their recommended supplier.

Of course if you are moving some or all of your UK possessions to your French property, you will probably need some help from a specialist removals company who deal with overseas projects. These can be expensive, so shop around, and check some key facts:

• Are all your possessions insured while with the removal company, including while at sea, and to what limit?
• Is there a ceiling on single item value?
• How long will it take?
• Will they help with unpacking, and will you need to be present?
• Are they members of The British Association of Removers Overseas or The Association of International Removers?

As with many elements of your dream move, recommendation goes a long way, so use internet forums or any friends you know who have made the move to the mainland. Since your belongings will be away with you for some weeks, make sure you keep a list of what’s where, and don’t pack anything you might need meanwhile.

There is also the issue of ‘Letting Out’ for many Brits buying property in France, or at least many of those who are not living permanently in the new property. Don’t assume that letting your property will be easy or that it will be full 50 weeks per year – get an idea of the local rental market and be realistic. There are plenty of good websites where you can advertise your property to let, or your agent may be able to help locally.

You should inform the local mayor’s office that you are intending to let your property. Remember that a lettings agent will also be able to help with basic maintenance, cleaning and is an extra pair of eyes in your absence – at a price of course.

And don’t forget that ongoing bills will continue to accrue on your new purchase. Local taxes, utilities, maintenance and gardening will all need attention – as an expat in a foreign country, it will help to make friends and gain useful local contacts, again making sure not to pay over the odds. By now you will have a French bank account open and be able to use that to facilitate local payments even if you not present, just make sure never to bounce a cheque in France as you will quickly find this is taken much more seriously than in the UK. Again if you are letting your property through an agent they will usually offer to take care of bills for you for a small administrative charge.

Finally, make sure you have the relevant permissions and paperwork if you are permanently moving your pets, your car, or any other items which might need registering in France – obtaining permits in advance will avoid uncomfortable brushes with the authorities. The French Consulate in London is a good resource for checking what is needed.

Useful Links – Moving to France

British Association of Removers (Overseas): www.baroverseas.co.uk

Association of International Removers: www.iamovers.org

French Consulate in London: www.ambafrance-uk.org

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Buying Property in France: Tax, Inheritance, Pensions & Insurance

Let’s deal with the easy part first – insurance. You will want to make sure you have sufficient insurance for your new property and its contents, especially if you are not living there all year round. There is a useful contact below based in the UK who can give you a quote and some guidance, or you can ask your estate agent for some local contacts – or again do your research online and ask others who they have used.

For most people, the most complex part of buying property in France can be understanding and coping with a new set of tax, inheritance and other financial laws. This is one area where is usually pays to take some specialist advice.

French inheritance law is very different to the UK, and if you were to die without leaving a will, your French estate might not automatically pass to your spouse for example – this is something worth investigating and getting right.

Similarly, your tax status will depend on how much time you are spending in the UK and how much in France, where your income is, and so on. If you have a UK state pension, you can arrange to have it paid directly in Euros to France if desired, but most private pensions will only generate payments in sterling, so you will need to use a currency broker to make the most of your transfers of this income across to France.

You may be entitled to a tax rebate if you have had income in the UK for part of a tax year, but likewise it may be worth your while continuing to pay National Insurance in the UK even while you are in France, to maximise your state pension. Talk to HMRC or your UK accountant who will be able to make sure you are not paying more than is required.

Your French income, if you have any, will be taxed locally at rates from 0-45% depending on the level of income, similar to the UK system but spread across ‘parts’ of each household.

Useful Links – Insurance & Tax

Intasure insurance for overseas property: www.intasure.info

HMRC guide for non-residents: www.hmrc.gov.uk/nonresidents

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Life in France

What are the main differences between life in the UK and France? Here we look at some of the main points to consider in healthcare, language, education and other common questions about day to day life.

Healthcare

France boasts one of the best-funded healthcare systems in the world (those high tax rates have some benefits), but like many other developed nations, there are current reforms in progress aimed at cutting costs. French citizens have had the luxury of access to private healthcare services subsidised by the state for some years, and costs have spiralled somewhat out of control.

Nevertheless, the standard of care is high. The state health insurance system (l’assurance maladie) is complemented by private policies (assurance complimentaire) and in order to access healthcare services, you will need to register with l’assurance maladie in the first instance. This system provides reimbursement of the cost of treatments, but only up to certain percentages, so if you want full cover you will need to add a private policy too. The state system works by use of a Carte Vitale which you present at the point of paying for any medical services for reimbursement in around a week; everyone over the age of 16 is required to obtain one.

If you have French employment you will be covered by the main State-administered scheme, but if you are retiring in France you will need to make use of the CMU (Couverture maladie universelle) which, at local level, is administered by CPAM (Caisse Primaire d’Assurance Maladie). The third possibility is that you are running your own French business, which would mean a different cover: from RSI (Regime Social des Independents).

Finally, if you are still working and living in the UK, and visiting your French property without living there permanently, a simple EHIC card issued by the NHS will cover you just as it would if you were on holiday, since your National Insurance contributions are still being made in the UK. (Make sure you always carry your EHIC card about your person, to avoid complications or delays if you need treatment.)

For those of you moving permanently when buying property in France, whichever category you fall into, you can gain initial cover under EU rules using an S1 Form, which will cover you until you enter employment or start a business, or until you register with a CPAM if you are retiring. Form S1 transfers your right to obtain healthcare, from the UK to France, without the need to make social security contributions. S1 also covers you if you are at state retirement age and taking a UK state pension, assuming you have made sufficient National Insurance contributions for the last 3 tax years.

Once you have moved permanently and registered in the French system, you should obtain the French equivalent of an EHIC, a CEAM (Carte Europeenne d’Assurance Maladie) which will cover you in other EEA countries when you travel.

The options may seem slightly complicated, so it is worth discussing this with the Department for Work & Pensions well in advance of moving to France, specially if you are unsure of your National Insurance record in recent years; the relevant contacts are below.

Dentists and opticians are also covered by the state system, without referral from a doctor, but you will find particularly with opticians that the rate of reimbursement compared to the costs can be small. Opticians will only provide reimbursed eye tests if you have a prescription from the last 3 years, otherwise you will need to visit an ophthalmologist for a full examination, and you will only receive a €15 reimbursement of the cost.

It is also worth noting that you must register with a family doctor (Medecin Traitant) to be eligible for reimbursement of healthcare costs. You will be given a form when you register for the main healthcare system, and can choose a doctor as you wish, who will then become your main route to which you receive all other medical services and treatments as is usual in the UK. If you seek treatment without a referral from the doctor, you will likely pay higher fees and receive less reimbursement.

Useful Links – Healthcare

EHIC Card applications: www.ehic.org.uk

S1 Form from HMRC: www.hmrc.gov.uk

Department for Work & Pensions: www.dwp.gov.uk

Language

Much has been made in recent years about the efforts, lack of effort, of the British expatriate community in France. Unlike the more concentrated enclaves in Portugal and Spain, France remains fundamentally French, and as such it is a good idea to learn the language if you are considering spending a good portion of time there.

There are many classes, both traditional and online, available while you are still in the UK. If you learnt French at school you might be surprised to find how much comes back to you, but even if not a grasp of the basics will get you a long way. You will probably find that a lot of French people will reply to you in English, but they will appreciate the effort, and you are more likely to find favours forthcoming from local tradesmen and neighbours, if you are seen to make an effort to fit in to the local culture.

Furthermore, learn about the area you are moving to and its history, produce, and any local customs which might vary. Many Brits who move to France find the whole process ever more rewarding as they embrace a new culture and learn about a new place, making it part of their lives rather than just a holiday home or quiet retirement.

Useful Links – Language

Rosetta Stone self learning courses: www.rosettastone.co.uk

Education

As a brief overview of the French education system, there are 4 main types of school up to the compulsory age of 16:

• Ecole Maternelle
• Ecole Primaire
• College
• Lycee

These roughly correspond to crèche/nursery (up to age 6), primary school (up to age 11), middle school (up to age 15) and high school (up to 18).

There are generally fewer school days per year than in the UK, although the school day is likely to be longer, and in many regions school runs on Saturday mornings but not on Wednesdays. Nearly all schools will also have a child care system, available for a fee, for out of hours supervision if required for working parents.

The French education system is described between average and very good, depending on which statistics you look at, but is generally sound. If you want your children to attend French state school, you will need to register at your local mayor’s office, or if you need to register on your arrival in France you will need the education district office. Proof of birth, immunisations, residence, insurance and parents’ identity will be required.

Useful Links – Education

French Ministry of Education (in French): www.education.gouv.fr

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Summary – Buying Property in France

Buying a property in France is a challenge, but one that can be overcome with some good advice, determination and good spirit. Thousands of British buyers are purchasing properties in France each year, and the overwhelming majority tell us they have enjoyed the move and have no regrets. There are likely to be hurdles along the way, but it’s a great experience, with a fabulous result – your own second home abroad away from the bustle of the UK. We hope that you have found this article useful if you are considering buying property in France; do feel free to contact us if for further help as we speak to buyers of French property every day and are likely to have heard about most problems or issues before. With some research and support, we hope that buying your French property goes smoothly and we look forward to being of service.

To contact the team at Currency Index, please see our contact us page and complete your details. We do not pass information to any third parties unless you ask us to.

Article written by Robin Haynes   Visit Robin’s Google+ Page