People, Property and Profit
Volume XIX, Issue 8
PEOPLE AND PROFIT
I’ve been a fan of France 24, the national news channel in France, since its inception in December 2006. It broadcasts now in four languages: French, English, Arabic and Spanish. The lazy side in me loves the English version and with it, a lot of its special segments targeted to an Anglophone and therefore foreign viewer.
You might have even noticed that I tend to quote their reporting or take screenshots from their videos. They are a refreshing change from news outlets like CNN which sensationalize and slant the news in their own viewpoint, although that’s not what CNN wants you to think. By comparison, France 24 delivers the news in a straightforward manner without much bias, if any. And the news is more centered on France and international, but with a strong bend toward the U.S. which is obviously very important on a worldwide scale.
It was an honor to be contacted by a producer of the business segment led by Business Editor, Stephen Carroll, who wanted to know how Covid-19 has affected the foreign property market for his People & Profit segment. With transactions down across the nation this past year, he wanted to know if our business was down, too.
The answer is “au contraire!” I’ll let you find out for yourself what my answers were to his query. You can watch the interview on France 24, today at 4:45 p.m. CET (France time) or if you miss it, the segment will post on their website!
GETTING A MORTGAGE WASN’T SO EASY BEFORE…
And it just got harder! The rules have tightened up, thanks to the Haut Conseil de stabilité financière (HCSF), which is trying to “calm down” the French property market’s longer mortgage periods and wide variety of lending options.
The HCSF, France’s overseer of the country’s financial system, wants the banks to take fewer risks. Real estate credit had a 5.4 percent growth since 2020, in spite of the pandemic. In the Eurozone, France has more household debt than any other country.
The new limits include a maximum of loan repayments not to exceed 35 percent of a borrower’s net income, and for no longer than 25 years. By comparison, in the U.S., lenders generally look for the ideal “front-end” debt to income ratio (DTI) to be no more than 28 percent, and the “back-end ratio,” including all monthly debts, to be no higher than 36 percent. Front-end DTI only includes housing-related expenses. Back-end DTI includes all your minimum required monthly debts. In addition to housing-related expenses, back-end DTIs include any required minimum monthly payments your lender finds on your credit report. The most common term in the U.S. for a fixed-rate mortgage is 30 years, but shorter terms of 20, 15 and even 10 years are also available.
The idea behind the Banque de France’s strategy is to be as prudent as possible so that borrowers don’t “bite off more than they can chew.” In addition, a buyer must deposit at least 10 percent of the purchase price, although the Notaires currently often allow 5 percent to be held in escrow, even if 10 percent is the final default amount. Lenders are also getting tougher about what kind of worker to which they are willing to lend. If you’re salaried with a permanent contract (CDI), then that’s gold to the lenders, but if you’re in a sector threatened by the pandemic such as tourism, aeronautics, catering or events—all industries widely affected by the Covid-19 pandemic—you’ll have a harder time getting a loan.
On top of it all, is FATCA, the Foreign Account Tax Compliance Act. Non-American banks and financial institutions around the world are officially required to supply the U.S. authorities with the tax information numbers of all their American clients, or potentially be in breach of FATCA. As a result, fewer banks are willing to take on American customers.
So, the news isn’t good…but all is not lost! For more information about getting financing in France, visit our site, and be sure to tell Kim Bingham at Private-Rate that we sent you!
DETERMINING YOUR RETURN ON INVESTMENT
The Agence Nationale pour l’Information sur Logement (ANIL) has posted an ROI simulator for landlords to determine what they can expect in rental returns, but that’s not the only tool on the site to determine the costs: financing diagnosis, amortization table of a loan, PTZ (zero interest loan), acquisition costs (notary fees), the cost of a mortgage and capital gains tax.
The return on investment simulator for rentals allows for various factors, such as periods during which the property might be vacant, along with tax regimes. It’s all in French, mind you! See it here.
The Adrian Leeds Group
P.S. If you’re considering transferring currency (for a home purchase, perhaps?), do it with one of our recommended partners to save about two percent on the commissions and fees! See our currency page for more information.