mortgage for French home

archiefreddie

hi guys
i have been meaning to join this site for ages now but not sure how it operates but i have a question i hope the group may have answers too.
last year after 30 years of hard work we managed to finally pay off our mortgage on our existing home. we now would like to buy a home in France so we now need a new mortgage or is it a re mortgage can we use our existing home currently valued at 200k to borrow 130k to pay for the new French home? we do plan in the future to rent out the French home as a possible holiday let until we retire then sell this existing property and buy a small flat in the UK and flit between the UK and the French property...sorry its a bit long winded but can anybody in the group advise us of the pro and cons please

minimike2

There are a number of implications of the various ways of doing this - Your best bet will be to start with a broker who has experience of such transactions, or even better, specialises in overseas property.

Be wary of advice you may get on any further posts here as there is a lot more to consider than a lot of people not experienced in this kind of lending will not bring up. I know that's why you have come here, but really you need to see someone to get the proper advice following a full fact find, which cannot be completed on here!

AlexMac

Also, a bit off topic in terms of your original enquiry about mortgages for an overseas holiday home, BUT...
based on our own experience, that of several friends plus press reports, I'd caution you to do some forward cash projections based on what's happened in recent years, plus less certain future possibilities, and of course, what you want to achieve either in terms of financial and retirement planning, holidays or quality of life.

The two big known historic factors have been
- House Price Inflation which has been massively higher in the UK than in France or Italy, and certainly in Spain- where many properties fell massively in value after their boom before 2007.
- Variation in £-Euro exchange rates; anything from £1=1.6 Euros on its launch (so overseas property was cheap to buy as you got a lot of euros for your sterling), to almost 1=1 a few years ago (so it was dear to buy but advantageous if you sold an overseas and brought the cash back) - currently under 1.3 Euros to the pound and falling.

To illustate this; our mates bought a French Property about 12-14 years ago for 210k Euros. They are thinking of selling, but will be lucky to get 240k for it, whereas property in our part of the UK has doubled in value in that time. We bought a little Italian place about the same time for 33k Euros (then only about £23k in sterling) spent 8k doing it up and sold it five years later for only 36k Euros- and so, would have lost money except that the then weak pound meant we brought home almost £33k when exchanged.

We also got a bit bored with it, to be honest, and costs in Italy went up; Council tax and utilities were cheap, but Ryanair flights, car hire and even meals out became more expensive. Our friends' French place costs them a few thousand a year in taxes, energy, service charges, stc; which would buy you a lot of holidays.

As regards unknowns, many countries are cracking down on unlicensed (or untaxed) amateur holiday letting.

The other big unknown is EU membership. A few years ago, the French tried to tax British second home owners on notional rental value, whether or not they let out their places. The EU said thay couldn't discriminate against another member state's citizens, so would also have to tax their own nationals. I bet they'd re-think after a BREXIT!

In your case, you'd be tying up a big % of your equity in an asset which would not necessarily appreciate/hold value as much as (I suspect) a little Buy to Let in the UK? When we bought in Italy, we comitted less than 7% of the value of our UK home- much less risk even if (like other friends who bought a dodgy off-plan Spanish place in 2006) it turned out to be worthless ten years later. A UK BTL property would also generate an income of 4%-10% depending on location, and as you'll see from the 'Housebuying...' forum, is less difficult than you might think.

So what's it for? A place in the sun or a retirement nest egg...? You could always rent overseas to test it first too. Northern france in winter is freezing!

Sorry about the unsolicited lifestyle advice!

archiefreddie

many thanks for your reply....most helpful i will indeed consult professional advice
once again thanks

archiefreddie

many thanks for your reply yes you are right on most levels i think i need to do a bit more homework on this. but our plans to move isn't really for financial gain (although it would be nice) really a holiday/second home for the family whilst keeping the one we are currently in...as myself and wife have about 15 years of work left in us..then eventually selling this one paying off the outstanding mortgage on the French property and perhaps buying a small apartment in the UK and flit between France and the UK (all very nice in the ideal world perhaps) as for the French location the region we adore is the charente region which is border line south of France but not south of France prices..meanwhile whilst we are still in the UK we could rent the French one out just for a bit of income...many thanks for your advice its nice to get information from people who have done it got the T shirt etc..... i guess at the end of the day we are not looking to make a massive financial make just a more laid back way of life in our twilight years and making this property which we have worked so hard to keep and pay off work for us....kind regards and thanks

nkkingston

Don't forget if we leave the EU 'flitting' is going to get much harder!

Thrugelmir

nkkingston wrote: »

Don't forget if we leave the EU 'flitting' is going to get much harder!

Open borders may well not last for ever if the current crisis continues.

archiefreddie

i quite agree moving to and from is going to be much more difficult ...