Q& W
Need advice? Put your problems to our panel A
e have just found a property to buy in France, and have been
told that completion will take place in January. We need to pay for the property in euros, and are concerned that from now to the time we complete, the exchange rate will worsen, making the property too expensive. What can we do?
MAR BONNIN-PALMER of Moneycorp responds (
moneycorp.com): The constant fluctuations of exchange rates are one of the most serious risks for overseas property buyers. You can see for yourself the movements of the pound to the euro over the last nine months. So, it is easy to see how a
combination of volatility in the currency markets and the gap between the purchase contract and completion (which can
Mar Bonnin-Palmer
average about two months!) can pose a severe risk to the value of the transaction. In some cases, the fluctuations can be so extreme that buyers can no longer afford the property. For example, a potential
buyer signed a compromis de vente (purchase agreement) in December last year when the GBP-EUR rate was above 1.16 but only completed early in February, when it dropped to
Ask the experts
AVOIDING CURRENCY FLUCTUATIONS
1.11. This would have created a substantial increase in the property’s final price due to the exchange rate movement. In fact, for a buyer holding
sterling and wanting to buy a property for €350,000, the fluctuation in rate would have meant the real-term cost would have increased by £15,000. So, what can you do to remove the risk and uncertainty brought up by the exchange rates? In situations like this,
the guidance of a specialist company can make a difference. Their expertise will help you understand your options and decide the best solution for you and your budget. The outcome will often depend on your financial circumstances, timeline and ultimately, how you feel about risk – whether you prefer certainty over your budget or to wait and see if the market moves in your favour.
For example, a ‘forward
contract’ might be preferable if you are working to a tight budget and prefer certainty as your completion date approaches. It is a popular tool for overseas property buyers as it allows you to fix the exchange rate in advance of your completion – for up to two years – so you can be sure the cost in pounds for your French property doesn’t change.
TOP TIPS FOR GETTING A FRENCH MORTGAGE
We would like to buy a property in southwest France and had planned to use a loan for this, but we have heard that it can be tricky getting a French mortgage. What advice can you give us?
JEEVANTHY NIVERT of Societe2courtage replies (
societe2courtage.com): Getting a French mortgage can be a challenge, and it can be even more complex when you are buying from overseas. Financial institutions may be more hesitant to grant a loan to those living abroad, but that doesn’t mean it’s impossible. These three
Jeevanthy Nivert
essential tips will help you obtain a mortgage: 1) Financial stability: Just as for a resident, the bank first examines your financial situation. Since mortgage loans are not very
90 FRENCH PROPERTY NEWS: November/December 2023
profitable for banks, it is even more important, in their eyes, to ensure that you will be able to repay this loan. Therefore, banks favour borrowers with stable financial situations. Unlike with residents, they pay particular attention to the type of employment contract and the employer you have. 2) Build a strong application: As long as eligibility criteria are met, it is advisable to assemble your loan application as quickly as possible. To facilitate the review of the application, banks may request document translations. The contents of the application vary according to the bank’s
requirements, but it should always include, in as much detail as possible, the following elements: identity, current address, marital and family status, exact income, current employment contract, financial situation (debt, existing loans, etc) and status of assets. 3) Required down payment: It is also important to expect that loan conditions will be stricter and different from those for residents. To ensure they cover their costs, banks may, for example, require an initial down payment representing between 20% and 30% of the property’s value, while a standard loan for
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