Buy To Let Mortgages

Following the success of the buy to let as an investment idea, many people have begun to investigate the possibility of similar investments overseas, and France, being a popular holiday destination seems the perfect place. France is also the first choice for many because property prices are much cheaper than in the UK as well as in many other European countries. More and more developers are bringing new buy-to-let opportunities to the market. New build buy-to-let properties include off-plan as well as refurbished properties.

Some people want to purchase a property in France which can be let out most of the time, but available for themselves as a holiday home for two or three weeks a year. This is often referred to as a seasonal let. Others are looking for a long-term investment in property that will give a total return superior to that available from financial investments. This normally means letting the property unfurnished to a local person for use as a home. This is called a permanent let and so similar to a buy-to-let in Britain.

If buying a property to permanently rent out, the rental income is treated differently; the monthly cost of the mortgage you have taken to fund the property is deducted directly from the rent, or potential rent, that you earn from the property, before they look to your 1/3 of income for support. Thus, if you are borrowing on a property that is to be let, you can afford a larger loan.

It is possible that your rental income will offset your mortgage, but in order to achieve this, you usually would need to put down a good deposit – say between 30% – 40%. Interest Only options will keep repayments to a minimum but this type of product is not available via all lenders in France and depends on your personal financial situation.

If considering a Buy-to-let mortgage, it is good to know that the costs of purchasing a new build property are far lower than those for a property more than five years old. This is despite the fact that purchasers need to pay TVA – a form of VAT which can equate to 19.6% of the property value. There is no agent to pay (saving 5 – 10%) and notaries’ fees are lower (saving 3%). Also, many long-term tenants prefer to rent a new property. So it may well be worth considering this form of purchase for a buy-to-let. View our current new build properties.

Good rate of return
Using figures typical of a French permanent Buy-to-let, if for example you put down 30% on a property, let it at 5% and use the rent to pay off the debt over twenty years at a rate of 3.6%, your 30% investment has multiplied five times. The rate of return on both seasonal and permanent lets varies between 4 -10% per annum gross, though this depends on the property location and costs to keep it let out.

Seasonal let properties in the popular ski resorts of Val d’ Isère and Chamonix can ask high rents and yield a 10 % gross even if the property is not fully let out. The costs charged by the agents however, can be up to 25 % and this reduces the yield to 7%. Using the right mortgage can boost return to 12 – 15% p.a. (excluding capital gains).

Buy to Let Mortgages

FrenchEntrée offer the best Buy-to-let mortgage options on the market, Apply Online