After all, they have the money so why not?Well, there are at least 5 good reasons why financing your acquisition is a smart strategy...
With interest rates in the Euro area at close to historical lows, a 20 year mortgage can be arranged at below 2%. Taking advantage of this would allow you to free up 80% of the capital you would have invested in that piece of French real estate to invest in a high return business project or other investment.
Wealth tax kicks in on total assets held in France over the value of about €1m. Financing your property acquisition can take you out of this bracket altogether or, at least, reduce your exposure.
We live in interesting times. Balancing your Euro assets against your Euro risks makes your portfolio self liquidating.
Currency fluctuations can leave you in difficulty if you have not bought a forward contract with your FOREX specialist (More on that later...) Your broker can arrange what is effectively a back-to-back mortgage where you put foreign currency on deposit with a French bank and borrow the equivalent in the form of a Euro mortgage. This allows you to go ahead with the acquisition now and pay off your mortgage later when you judge the exchange rate to be in your favour.
If you are buying a property you intend to rent out for part of the year, you can offset mortgage interest against any income generated and reduced your income tax exposure.
There may be other good reasons for taking out a French mortgage but, in my view, these are the 5 most important ones.What's been your experience? Are you considering a French mortgage? Leave a comment below and let me know what you think...
Rory Ramsden is a French property finder and buyer's agent working for high net worth private clients wishing to buy a chateau, manor or vineyard in the south west of France. He has lived in France for 8 years after spending time travelling the world on business.
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