Q. In addition to the property price how much should I set aside for purchase costs?

A. Purchase costs will vary according to the age of the property. For new property allow 2-4% of the total purchase price and 7-10% for resale's more than 5 years old. There will be additional costs if you choose to take a mortgage on the property or use the services of a specialist UK based solicitor, to assist you with the purchase.

Q. How can I borrow money for the purchase?

A. If you want to borrow on the property, you will have to use a French lender, who will typically lend up to 80% of the purchase price. Alternatively if you have equity in any UK property, this can be released and would then be treated as a cash purchase in France. It has become increasingly common amongst UK purchasers to combine both of these options.

Q. Are there any advantages in the method I use to finance the purchase?

A. It's swings and roundabouts. If you take a French mortgage be prepared for setup costs of around 1-2% and remember if you are making the repayments from a Stirling income there are costs involved when transferring money, along with a fluctuating exchange rate. This is probably the easiest way of financing, especially when larger sums are involved and if you choose to rent the property you can offset your interest payments against any income. Financing by releasing equity from another property saves you the 1-2% set up costs and cuts out the inconvenience, risk and expense of exchanging and transferring currency over the term of the loan.

Q. How much can I borrow?

A. In general, the amount you can borrow in France is restricted according to your disposable income. When the repayments towards all loans and mortgages are combined the total should not be greater than a third of your gross annual income(s).

Q. Why should I consider using a specialist solicitor in addition to the notaire?

A. Notaires in France are public officials whose role is to act precisely in accordance with French law. As an overseas purchaser you will not be treated any differently to a French one. Therefore if you were looking for documents to be explained or translated into English you may wish to use an intermediary who will do this for you. There are several firms in the UK and if you would like a recommendation please let us know.

Q. What is Leaseback?

A. Referred to in France as Residence de Tourisme, the scheme was introduced over 20 years ago as a way of achieving higher levels of occupancy from second homes in key holiday destinations of France. Before its introduction, most owners who bought their property as a holiday home were typically using just a few weeks each year. This was becoming a problem in areas such as the Alps and the South of France where there is a huge demand for accommodation and very little land available to build new developments.

Q. How does it work?

A. Developers will offer different options with varying numbers of weeks use and/or income but the basic structure always remains the same. The purchaser buys the freehold of the property form the outset and agrees to lease the property back for a minimum period of 9 years (can be 9, 10 or 11 years). In return the tax authorities will deduct the VAT (19.6%) from the purchase price on the basis that you remain within the Leaseback structure for a total of 20 years. If you choose to opt out within this period, you would have to pay back prorata the original VAT discount. In addition, the developer will usually offer a number of weeks for your use and an annual income, normally quoted as a percentage of the purchase price. When you come out of the scheme your property will be returned to you in good order for you to use or rent as you wish.

Q. It sounds complicated and I don't like the idea of only being able to use my property for 4 weeks each year.

A. Leaseback doesn't work for everyone, but for most people it offers an easy and stress free way of owning a second home. When you consider the initial tax incentive (VAT) along with a guaranteed income and the fact that the property is let and maintained on your behalf, the scheme does encompass all of the elements that many potential purchasers require when searching for a second home. Also do not confuse the term Leaseback with Leasehold. These are freehold properties.