Latest transaction: €945,000 Loan for a property in Meribel.

Meribel 1,89M

The profile

Buying in: Meribel, Alps
Property price:
Mortgage amount: €945,000
Mortgage type: Repayment
Mortgage term: 15 years
Interest rate: 1.95% fixed
Loan-to-value: 50%

The background

For all purchases valued over €1.3m in France, you may be liable for the wealth tax as, since 2017, this tax is now based on the property value only rather than your total assets based in France since the changes in legislation in 2017. 

The calculation for how much you will pay in tax is based on your equity in the property. Hence, potential cash buyers may consider taking a loan out against the property to reduce the equity in the property. Whilst a loan is usually more expensive than the cost of the wealth tax, there are additional benefits to taking out the loan particularly for a currency hedge or if the property is to be rented out, the interest only the loan is usually tax deductible. 

More in depth information on the Impot sur la fortune immobilière can be found here.

Our client choose both a mortgage and an SARL de famille for the acquisition. His intention was to have his children has shareholders so that he has a tax efficient way to transmit the property to his children in the future. However, children can only own a very small percentage of the company and must be able to afford their share of the loan if they are adults. 

Our approach

Therefore, after discussions with an accountant the client decided to buy as a joint shareholder with his wife for the purpose of the mortgage application. The clients always have the option to transfer shares to their children later on at a small cost, particularly as the equity transfer is low while the mortgage is in place.

The mortgage we put in place was a long term fixed rate to keep the risks and interest costs down, with a low level of loan to value which meant the rental income would come close to paying the mortgage costs.

FPF work very closely with a notary in the French Alps who can assist you in setting up a company, opening a French bank account and arrange a power of attorney to sign on your behalf as well as accountants and tax advisers to help optimise your purchase in France