Thursday, 5 July 2007

Mortgage Application

Things are getting serious!

With written confirmation that a standing order is set up to send the required amount of 'income' from our English bank account to our French, our mortgage application has been completed for our apartment in Lamalou.

In case you have not been keeping up with the story........

Richard's pension can only be paid into an English bank account.

To get a French mortgage, your monthly repayment cannot be more than one third of your net monthly income - and this income has to be going into a French bank account.

You see our problem?!

So now the pension goes into our NatWest account, a standing order transfers approx three times the mortgage repayment (allowing for the euro exchange rate!) over to our SMC account.

Still with me?!

Interestingly, even though the mortgage repayment will easily be covered by the rental income, this is not taken into account as income - because we do not have a history of this yet. That is, we do not have a history of declaring it on a French tax return yet.

Anyway - we are getting there. Mortgages are relatively rare here in France compared to England, because a far higher proportion of people rent rather than buy due to the difficult inheritance laws.

When we first spoke to our SMC Bank Manager about our idea of buying a second place to rent out, I knew more than he did about mortgages - which is maybe not surprising since I have worked in the financial sector all my life!

However on our return visit (once we had found a possible place to buy and knew the amount we wanted to borrow), he had done his homework.

Today as we made the final application (you can only proceed formally once you have the compromis du vente), he certainly was on the ball. He checked whether we needed the full assurance and realised (as we did) that we only needed it on death - not if we are sick and unable to work since our 'income' is in fact a pension that would not alter during illness. So that reduced the monthly repayment a bit!

He also noticed that the interest rate has gone up 0.5% since we had our preliminary quote and is going to challenge it - he feels we should pay based on the original interest rate. Good luck to Mr Palembo!

He even checked that the rental income (the curiste season is only 9 months of the year which he knew) minus the mortgage payments, will leave enough to not only pay the taxe fonciere/habitation but might also provide us with a bit of surplus.

Finally, since he knows the local rental market (the apartment is just up the road from the bank) and the notaire we are using (his preferred one as well) it will all go through quickly.

As you can see, French banks are far more insistent that you are able to actually afford the mortgage repayments than English banks.

So .... watch this space!
A couple of things in passing.

The Internet has been 'down' the last few days so I am posting early today just in case I lose the connection!

Also, in preparation for our meeting at the bank today, Richard went there yesterday to get all the originals of the documents and their translations that we might need to have copies of. As recommended, we store everything important in a bank box because if/when you have a house fire or burglary, having no documentation is not considered a valid excuse - if you cannot produce them you cannot get anything done in France!

You go into a secure vault. The bank then use their master key to 'open' the lock of your box and leave the room. You are then left to actually open your box with your own key. All very simple.

When Richard was there, the bank man was showing a new employee the procedure. When Richard got home, he got an urgent message from the bank - he had not by any chance accidentally picked up their master key? They had lost it!!

Today at the meeting we were asked about our current house, the fact that we own it outright, and what was its value? We explained that the deeds, etc were in their bank vault and ..... unobtainable because they had lost their master key.

Ah! said Mr Palembo - maybe he did not actually need to see the deeds......

1 comment:

Alex said...

Welcome back.