|
Mortgages and
contractual protection
When
a mortgage is necessary to finance a purchase, you should ensure that you
are sufficiently well protected in the event that you cannot obtain the
funding necessary to make the purchase. There are two main ways of
financing by borrowing: a re-mortgage or extended mortgage on your
existing property or a mortgage secured against the French property. In
protecting yourself, it is essential first to be aware that the position
will differ depending on the financing option chosen and to address this
issue even before you find a property to protect yourself as far as
possible.
If
you are purchasing with a mortgage secured against the French property,
the obtaining of the mortgage should be a condition precedent of the first
contract (‘compromis’). This means that if you do not obtain the
mortgage you will not have to proceed with the purchase and your deposit
will be returned. This is effectively an automatic entitlement under the
terms of the French Consumer’s Code.
Certain
seek to extend these provisions to cover re-mortgaging of an existing
property or an extended mortgage. This is highly inadvisable as it cannot
be guaranteed that this extension of the Consumer’s Code would be
accepted. It is, after all, for the purchaser to prove the failure of a
condition and that he is thus entitled to a refund which may be rendered
very difficult in such a situation for a variety of reasons.
If
you are intending to finance in this way, it is strongly suggested that
you obtain preliminary authorisation from your bank or building society
before embarking on the whole purchasing process or, at the latest, by the
time of your cooling off period. It is, in any event, better to know
exactly what you can achieve in terms of borrowing before setting out to
view properties – after all, you may be able to afford more than you
thought or you may, in this way, avoid overstretching yourself.
If
you are tempted to take the benefit of the provisions of the Consumer’s
Code but in fact intend to arrange financing by re-mortgaging or extending
an existing mortgage, you should be aware that the law lays down time
periods during which certain steps should be accomplished and that proof
of compliance with these deadlines can be required. If this is not
complied with, the condition can be deemed to have been met despite the
fact that you have not obtained the requisite financing. This could put
you in a very difficult situation indeed so you should only use this
condition if you really are intending to take out a mortgage secured
against the French property.
To
circumvent this problem, some suggest making it a condition of the sale
that you sell your other property. This type of condition is even less
advisable and you may well find yourself unable to get out of the purchase
if your other property does not sell.
The
heart of this matter is that you should think about how you will finance
the purchase before you even start looking at properties. The safest
option is to have the money in cash in a bank account but few of us are in
that happy position. If the purchase is reliant upon the sale of another
property, consider whether you can sell before committing yourself. If
not, be prepared to have to arrange bridging finance to ensure you can
meet your contractual obligations in France if your other house does not
sell or a sale falls through. Otherwise, think carefully about how you
will finance the purchase and seek the preliminary advice of an
independent financial advisor. At this stage, you should then ask whether
you are sufficiently protected in the event that your chosen financing
option does not work out. This question should be asked before you have
signed the first contract (‘compromis’) or at the latest by the time
of your cooling off period.
24/01/2003
- Issue of the week
BACK
TO NEWS
|
