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How Does It Work Buying Process Financial Projection Taxes FAQ
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Buying Process |
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If you intend to purchase a property in France, the chances are that the French system will be new to you, and the following text is meant to help explain the appropriate procedures in practical terms.
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The reservation contract
“contrat de reservation” is the document you will sign when you make a purchase of a
new condominium or house. At this stage the paperwork is the following:
- The reservation contract document itself,
- The specification sheet of the building,
- The development plan as well as the property floor plan,
- The lease contract (for leaseback property),
- Provide a deposit, check or money transfer of 5% of the purchase price to the (or your)“Notaire” (Notary)
- Proof of your identity (copy of your passport)
- The French law gives the buyer 7 days to possibly change his/her mind and go out
of the deal and get a full refund of his/her deposit.
Note : If you finance your purchase with the help of a bank loan, please review thereafter details on how to finance your property.
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The Closing
Once all conditions are met, the parties are bound to proceed to the preparation of a deed of sale in the proper form ( "acte authentique de vente") This is to be carried out by a "French attorney" called " Notaire" which represents, as a public officer, the French Government. Also if you prefer to have your own " Notaire", it is possible. The funds must be available at that time including closing fees which are about 3% of the purchase price and mortgage fees about 3% of the loan amount. This "acte de vente" can be done at the Notaire office in France or by proxy at the nearest French Consulate of your residence. From that date you have the property ownership, the time between the date you sign the reservation contract and the closing is about 90 days.
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Financing Your Purchase
Usually only French banks or some foreign banks with branch office in France will offer mortgage to property buyers. Also, our organization has connections with the banks services specialized for foreign buyers. We work with major European banks. As in any country the banks insure the loan by mortgaging the property that is being purchased. In normal standard the bank will lend 80% of the purchase price and will allow a maximum debt repayment (incl. other mortgage, car lease, credit card, etc.) ratio of 33% of your overall household income (salary, bonus, rental income, etc.).
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What are the conditions ?
In the reservation contract the purchaser must specify that the purchase of the property is under the condition to get financing (specification of the loan must be written down, loan amount, term, interest rate expected). From that time you have generally 30 to 45 days to find the appropriate financing under the specified condition. If you are refused by the lenders you will receive your deposit in full.
Whichever bank is chosen, the applicant will have to complete a mortgage application for"demande de prêt" which contains the usual requests for details of the purchaser(s), their employment, pay, financial position and particulars of any existing property with an estimate of its value.
Details of the purchaser's bank account will also be required and a standing order form will need to be completed. A reference and/or authority from any existing mortgagee (and possibly one's bankers) will also need to be furnished.
The precise details of the loan will vary from bank to bank. Loans may be at a fixed interest rate for the duration of the term or for a variable interest rate or a mixture/fixed for the first few years and variable thereafter.
Life assurance is compulsory when a loan is sought from a French bank. Most French banks have captive insurance companies or exclusive agreements with a French insurer so that the borrower becomes a member of a group insurance scheme. This may bring benefits in premiums and the normal French policies include health and invalidity cover.
Buildings insurance must also be taken out and will be assigned to the bank for the period of the loan.
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