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Any info on/experience of transferring a french mortgage?


Daft Doctor

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Hi, we currently have a french mortgage on our leaseback holiday apartment in the Alps.  We are planning to move to France permanently next year, renting a property for 6-12 months initially, then buying once we've settled and had a good look round for a house/chalet.  The french mortgage on the apartment is with BPI and is meant to be transferrable to a new property if desired.  As the mortgage has a very good 3 month euribor tracker rate (taken out pre financial crisis), we intend to sell the apartment then use any proceeds, capital from the sale of our UK property and the remaining french mortgage to fund the new house/chalet purchase. 

With the property market the way it is however, and in the full knowledge that it may take a long while to shift, it was our intention to put the apartment on the market very early on, possibly even just before we arrive in France.  A problem will arise however if we manage to sell the apartment whilst still renting in France, but before we have found or are in a position to buy a house.  My question therefore is whether anyone out there knows if in all cases where a mortgage is being transferred, must the sale of old and the purchase of new be simoultaneous?  On the other hand, if sale preceeds purchase, is it ever possible to 'park' the mortgage facility with the lender (having given them the outstanding capital), then draw down again and recommence payments once we have a house to buy?  I would rather keep the mortgage if possible for both the good rate and to avoid the pain of applying for another.  I'd be truly grateful for any insight or first hand experience.  I will try to contact BPI nearer the time, but my french isn't good enough to pose the question accurately and understandibly the staff I have contacted in the past have had a fairly limited grasp of english, so getting an answer may be difficult.  Just thought I'd tap into the knowledge out there and see if anyone has been there before.

Many thanks

  

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Just my own thoughts but I cant see a mortgage company 'parking' a good rate, what's in it for them?  If you are selling whilst you have an income on the Alps property then you will need to prove that income stream continues, i.e. be reassessed for 'affordability so pretty much a re-application IMO.

Is the leaseback still giving a return and if so how long does it have left to run?  These appartments are notoriously difficult to shift since the buyer has to take on just the remainder of the leaseback plan and these days there are huge numbers of new leasesbacks not selling.

Last bit of doom and gloom, the properties at end of leaseback are often worth less than you paid since they had nthe element of ongoing income built in and you often find other second hand 'normal' appartments sell easier and are cheaper.

Aside from all that I do hope you can get the result you are after, I would put it on the market ASAP though as sales are way down in the Alps, where I lived the local agent, who was swanning about in a posh car and lunching left and right a couple of years ago, has gone bankrupt. 

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Thanks Panda, very helpful.  The income from the leaseback wasn't taken into account in the original mortgage application, but my income will have dropped somewhat with the move, so if they need a further 'affordability' assessment at the point of transferring the mortgage there may be a problem (haven't done the calcs).  My gut feeling also says that you're right about the lack of a 'park' facility with the lender, I wouldn't offer it if I were BPI, I was just curious.  Teeing up sale of apartment with purchase of house might well be necessary not to lose the good mortgage (1.15% above 3 month euribor). 

The leaseback does give a decent return even taking into account deductions for Syndic, Tax Fonciere and for the 2 weeks high season use attached to the lease.  I am not sure whether leasebacks sell better with or without any personal use, but if it is the latter and if I still have the apartment in Dec 2012 I can ask to change the usage to make it a pure investment with a greater overall return.  The lease (with Soderev/Lagrange) has a further 7 years to run before renewal and the rent is due for upwards revision in December 2012.

In terms of value, having looked at the current local market, I have already factored in a certain 20% loss from purchase price on the leaseback in my calculations.  At such a price level this would improve the net rental return significantly for a buyer, but not necessarily enough.  Luckily we did put down a decent deposit and have a capital and repayment mortgage so even if we had to discount further we should still be in positive equity (just about - albeit a terrible investment overall). 

As to when we put the apartment up for sale, I know that the market is very poor and shifting it will be tough, but I need to be careful on the timing.  If I redeem the mortgage before July 2012 I will be hit with a 3% early repayment charge, so this will matter if I am unable to transfer it.  I would also ideally like to have the facility of the free usage for next ski season, but that is a much less important issue.  The apartment is in an attractive all year round resort, and I think it may be a case of seeking expert advice on when these ski/summer leasebacks sell less badly, then fitting in with that.

Thanks again

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