17 January 2006

Free holiday homes in France

Second home-seekers who desire an overseas property in France can effectively get a holiday home for free following the introduction of a new type of mortgage.
The emergence of interest-only leaseback mortgages is expected to help the French property market compete with Bulgaria and Turkey where overseas property investors have been turning of late.

It means the borrower of an interest-only leaseback mortgage can purchase a leaseback property in France, cover the cost of their mortgage and still use the property for a few weeks a year themselves as a holiday home, according to property investment firm Assetz.

The French leaseback scheme was introduced by the French government 20 years ago to increase tourism in areas such as the Cote D'Azur, the Alps and Paris by increasing the amount of quality holiday accommodation.

Under the scheme, investors purchase a freehold property and lease it back to a pre-selected property management company earning guaranteed rental income for at least nine years.

Investors are typically allowed to use their property for a set number of weeks each year for a holiday – although that depends on the development.

They also benefit from a 16.4 per cent discount on the property price with the French government providing a VAT cash back upon completion.

Until recently mortgage lenders in France would only offer interest-only mortgages on non-leaseback properties but this has now changed.

Investors can now purchase a property with a projected rental yield of five per cent on an interest-only mortgage of about three per cent of the property price. After mortgage costs, an investor would therefore receive two per cent of the property price per annum.

More here.

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