When buying a property in France, there are several important financial matters that must be considered and planned carefully. Here are our Top Ten Tips for foreign property finance:
1. What is your total budget? How much money do you have to spend on your property, the property buying process – including fees – and its ongoing upkeep and maintenance?
2. How will you fund the property purchase? Are you planning to buy your French property with a mortgage, by releasing equity from another property, or are you paying cash? If looking to take out a mortgage, it is worth noting that while mortgage availability for foreign nationals is generally good, there is no getting away from the fact that French lenders have tightened their mortgage eligibility criteria in recent years. Interest rates in France currently start at historic lows and it is possible to borrow up to 85 percent of the purchase cost. Obtaining an ‘approval in principle’ is recommend. This costs nothing, but will tell you up front about how much you can borrow, and therefore what price range you can realistically consider before committing to anything. It will also prove to vendors that you’re serious.
3. Be aware of currency market movements and their effect on the price of your property. David Johnson, Director at currency specialist, Halo Financial, has monitored currency trends for over 20 years, seeing dramatic exchange rate movements in response to economic and political events. See our currency market updates for more information.
4. Factor in all additional costs, such as property viewings and visits to the country prior to buying the property, along with legal (notaries) fees, agent fees, taxes, valuation and registration costs, and exchange rates when transferring money between countries. Hidden costs of buying a home in France include notaires conveyancing (legal) fees (notaire’s fees are calculated on a sliding scale, thus, the higher the price of the property, the lower the percentage the notaire will take; agent immobilier (estate agent) fees – these are usually, although not always, included in the price of the house and are usually in the region of 5-10 percent; Stamp duty (0.7 percent for property less than five years old, 5.80 percent for older properties – this should be included in the notaire’s fees); and land registry (0.1 percent). Quite often, some of these fees will be combined with the overall notaire’s fee, so you will need to check that you know exactly what you are and are not paying for.
Please note, it is not common practice in France to have a structural survey performed before buying a property, but the buyer has this option at their own expense should they wish (we recommend you do). Surveys vary greatly in price according to the size of property, location, etcetera, but as a rough guide, a basic survey may be as little as 200 Euros, while a full survey could be as much as 1,500 Euros, or even higher for a very large property.
5. Don’t forget the ongoing costs associated with owning a property in France. You will need to ensure any regular bills and mortgage payments are covered, as well as ongoing maintenance, amenities, and so on. Remember that if you are paying these in another currency, the same currency market movements will affect the price of these payments. Consider any regular and ongoing payments and discuss how you could potentially save money with a Halo Financial Currency Consultant.
6. Get reliable estimates for removals and shipping costs if you are moving to France permanently or planning to move belongings over. Ensure that these are included in your overall budget. Find a professional relocation and removals firm to give you a quote. If you are purchasing a home for investment purposes, and therefore not planning on moving any belongings to the country, you will need to ensure that the house you buy is furnished, or budget to furnish it once you have bought it. Unfurnished homes command less rental value than furnished ones, and are therefore harder to find tenants for.
7. Consider any inheritance implications, including Inheritance Tax, your will, and the effects of the property purchase on your estate. In 2007, Inheritance Tax was abolished for spouses and those in civil partnerships, although if you have children, they are still liable to be hit by the tax. French Inheritance Tax varies from 0 to 60 percent. The different rates depend on the proximity between the deceased and beneficiary. The tax is personal to each beneficiary and is not paid out of the estate before any distribution of funds is made.
8. Open a bank account. It may be worth opening a French bank account from your home country. Many banks in France do offer specially tailored non-resident accounts, so it is possible to set up an account in advance of your move. Setting up a bank account in France is easy, whether you are a resident or non-resident of the country. Before deciding on which bank to open an account at, though, it is essential to first check that the bank has advisors who can speak your language. Most banks offer English speaking advisors, for example, but ot all do, so checking up front may save considerable confusion and frustration at a later date.
Non-residents will have to set up a non-resident account (compte non-résident). Although the paperwork required to open a non-resident account will be similar to that for a resident, the likelihood is you will also need a letter of reference from your current bank in order for your application to be accepted and you may need to provide your two most recent bank statements as well. Most banks will require non-residents to open an account in person, but through some it may be possible to open an account from your home country. For example, Crédit Agricole Normandie operate Britline; an English-speaking phone banking service which
you can, unsurprisingly, open over the phone.
9. Organise salary or pension payments. If you are moving to France long-term, ensure that your salary or pension can be paid directly to you. The UK basic state pension is payable in France. Pensions that remain in the UK are subject to unique tax liabilities and obligations. Transferring these pensions to another jurisdiction under the Qualifying Recognised Overseas Pension Regime (QROPS) can help you protect your pension funds from double taxation and UK inheritance taxes and charges. It is essential to seek expert advice from an independence pensions/financial expert before taking any action regarding financial issues.
10. Plan ahead as much as possible and as far ahead as is feasible, to ensure you have accounted for all the financial aspects of your property purchase. Take a look at our Money Transfer Services to see how we can help you.
Salary and Income Tax information
The average salary in France for the tax year ending 2016 was just over 25,884 Euros a year. If you are classed as tax resident in France (you have lived there for more than 183 days in the tax year, not necessarily consecutively) then you must pay tax on your worldwide income. If you reside there for less than 183 days, then you need only pay tax on income earned in France.
Income Tax in France is progressive: the more you earn, the higher your rate. There is an Income Tax threshold of up to 9,710 Euros – those who earn less than this do not have to pay tax. The next group – those who earn between 9,710 – 26,818 Euros – pay 14 percent; those earning between 26,819 to 71,898 Euros pay 30 percent; while those earning between 71,899 and 152,260 Euros pay 41 percent. The highest earners (those who are take home more than 152,261 Euros a year) pay a tax rate of 45 percent on their earnings.
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