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6 Ways to Save Money on Real Estate in France

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In this article we discuss what additional payments will need to be made when buying an apartment in France and after it, as well as how to reduce these expenses.

Registration of the transaction

Notary

The main role in the registration process is played by a notary, whose participation is mandatory. They are responsible for the intermediary of the buyer and seller, conclude a preliminary agreement (compromis de vente), under which the buyer must pay a guarantee fee of 5-10% of the property value. The contract is valid for three months, during which the notary checks the legal purity of the transaction and calculates the expenses. They include:

  • registration fees (approximately 5.8% of the transaction amount),
  • fee for publishing the transaction announcement (0.7%),
  • fixed notary fee (1-4%, the exact amount depends on the value of the property and is determined by the scale established by law),
  • professional notary fee for additional help.

The approximate amount of expenses for each case can be calculated independently using the online calculator on the website of the National Housing Agency.

How to pay less? Notarization is required by law, therefore you cannot reduce or exclude costs of it. However, you can try to negotiate with the seller about sharing the amount.

Agent’s fee

Contacting a real estate agency can remove most of the hassle, but it will cost another 1-7%.

How to pay less?

Seymur BALAMMADOV
Partner
ASTEY

The participation of a realtor is not mandatory in France, but it can significantly simplify the search and negotiation process. But you should not consider the realtor as a security guarantor of the transaction. The responsibility for checking documents, establishing property rights and encumbrances, as well as making entries in the state register is on the notary. For this purpose, they may request additional documents, such as proof of the origin of funds.

Mortgage

When applying for a mortgage, add three more types of payments to the list of expenses:

  • a bank commission for processing documents – €500 - €1,000;
  • a loan interest: the average interest rate was 1.18% by October, 2019;
  • loan insurance: its rate may exceed the amount of basic interest.

How to pay less? If you really need a loan, carefully study all the details of the mortgage program.

Also read: Extras and Fees for Property Buyers in France

Taxes

There are three other ways to reduce real estate expenses by reducing tax deductions.

Tax on accommodation (Taxe d'habitation)

A specific French tax that was introduced in 1974. In 2016, its average size was €1,097 per year. Its cancellation began step by step from 2018, because it was one of the main election promises of the current president Emmanuel Macron. By 2022, the payment should be fully canceled; currently, benefits for certain categories are set at 30% for 2018, 65% for 2019, and 100% for 2020.

So, a married couple without children, if their total income for 2019 did not exceed €43,000, in 2020 can expect a 100% tax reduction for the main place of residence. A so-called regressive reduction is also possible: if the income of the same couple for 2019 did not exceed €45,000, they can individually calculate the percentage by which the tax will be reduced.

If the tax notification is mistakenly sent without taking into account the benefits, the owner can submit a request (réclamation) for recalculation within the stipulated time. The deadline for submitting it expires on December 31 of the year following the tax collection year. For example, for tax in 2018, the application deadline expired on December 31, 2019.

Property tax (taxe foncière)

Seymur BALAMMADOV
Partner
ASTEY

In France, remission of taxes is possible to exempt from paying real estate tax by 50% or 100% for 5 years for taxpayers who carry out energy-saving works in their homes built before 1989 for at least €10,000. The installation of heating monitoring devices or other energy-saving equipment is counted as well.

Remission for two years can also be obtained for newly built housing. In this case, you must contact the tax service within 90 days from the date of completion of construction.

Also read: Extras and Fees for Property Buyers in France

Income tax

If the property is rented out, the owner must pay income tax. When buying slum dwelling for renovation, you can get a discount under the Denormandie program, which operates in some French cities. Two conditions must be met:

  • repair costs take at least 25% of the cost of purchased housing,
  • long-term rental after restoration.

The amount of the benefit depends on the term of the lease agreement:

  • 6-9 years – 12%,
  • 9-12 years – 18%,
  • from 12 years – 21%.

For example, if the transaction amount is €200,000, the cost of repairs must be at least €50,000. Then when you sign a 12-year lease, the benefit will be €4,375 per year.

What you can buy in France right now:

Photo: pixabay.com

Quoting conditions of Prian materials

Tags: France, Real Estate, Property Maintenance, Taxes and fees

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