Purchasing real estate in France involves several costs beyond the purchase price itself. Often overlooked and, as such, exaggerated by prospective investors, these costs are strictly regulated by law. Unpleasant surprises can be anticipated and, most importantly, optimized!
The goal of this article is not to alarm investors with an endless list of costs. For your information, none of the projects offered through PATRIMOLINK included all these costs. Instead, the idea is to provide an overview of potential additional costs related to an investment in France, to put them in perspective and anticipate them, in a word: to optimize them. Knowing these costs well allows for better product selection and more accurate net profitability calculations.
What are notary fees? How much do notary fees cost?
In France, notary fees, also known as “notary’s fees,” include several components. These fees are mandatory when purchasing real estate and are collected by the notary handling the transaction. Notary fees are calculated as a percentage of the property’s purchase price.
Choosing your notary wisely doesn’t cost more, but it can pay off! A good professional will advise you during your investments and help you avoid potentially costly mistakes.
Here are the main elements included in notary fees in France:
– Transfer taxes (property transfer fees): This is the main part of notary fees. These taxes are paid to the department and the municipality where the property is located. The rate can vary depending on the location and type of property, but it generally represents around 7-8% of the purchase price for old properties and slightly less for new properties (2-3%).
– Notary’s fees: The notary charges fees for services related to drafting the sale documents and managing the transaction. These fees are also calculated as a percentage of the purchase price but are regulated by the State. They typically represent around 1-2% of the purchase price.
– Disbursements and miscellaneous fees: The notary advances certain costs on behalf of the buyer, such as registration fees, cadastre fees, and other administrative costs. These costs are then passed on to the buyer.
In summary, notary fees in France consist of transfer taxes, notary’s fees, and various disbursements. The percentages vary depending on the location and type of property. It is important to note that notary fees are paid in addition to the property’s purchase price.
What are the fees associated with my bank loan?
Fees associated with a bank loan, also known as credit fees, include various costs related to taking out and managing a loan with a financial institution. Some of these amounts are negotiable and may be subject to commercial concessions. Here is a list of common fees associated with a bank loan:
– Application fees: These fees are charged by the bank for processing the loan application. They can be a flat amount or a percentage of the loan amount, usually around 1% of the loan amount. They are variable and can be subject to a commercial concession during negotiations.
– Borrower’s insurance: Borrower’s insurance is often required by the bank to guarantee the loan repayment in case of death, disability, or sometimes unemployment (an optional and quite costly guarantee). Insurance premiums can be monthly or annual. This is a significant part of the loan-related costs. It is recommended to compare offers: taking out insurance with your bank is not mandatory.
– Guarantee fees: Loans for investment purposes require a guarantee, such as a mortgage on the property. Guarantee fees cover the costs of setting up this guarantee. The amount of guarantee fees depends on the loan amount and the type of guarantee chosen.
– Brokerage fees: If you have used the services of a mortgage broker to find the best loan, brokerage fees may apply. They are usually around 1.5% of the loan amount, with fixed sums (e.g., 5000 euros per case) depending on the brokers.
– Account management fees: Some loans may come with account management fees related to the management of the bank account associated with the loan. Account management fees are regulated by the decree of March 27, 2014. They help finance essential operations for the proper functioning of your account and to prevent bank fraud. The average weighted amount of active account management fees was €20.23 per year as of January 5, 2022.
– Early repayment fees: If you repay your loan before the scheduled term, early repayment fees may apply. These fees compensate for the interest lost by the bank due to early repayment. Do not hesitate to ask your banker about possible reductions in these fees.
It is important to fully understand all the fees associated with a bank loan, as they can significantly influence the total cost of credit. Before taking out a loan, it is recommended to ask the bank for a detailed cost simulation to make an informed decision. It is also advisable to discuss these fees with your advisor to find negotiation opportunities.
What local taxes will I pay?
Property and local taxes are taxes related to real estate ownership in France. They are collected by local authorities (municipality, intermunicipality, department) and contribute to the financing of local public services. Here is an explanation of each of these taxes:
Property Tax on Built Properties (TFPB): The Property Tax on Built Properties concerns constructed real estate, whether used for residential, commercial, or industrial purposes. It is calculated based on the cadastral rental value of the property, which is an estimate of the property’s annual rental value. The TFPB rate is set by each local authority and can vary from one municipality to another. Property owners receive a property tax notice each year.
For properties generating rental income, such as rental properties, the Property Tax can be deducted from taxable rental income.
As with all local taxes, rates can vary from one municipality to another and depending on the type of property. Tax notices are usually sent to taxpayers in the fall.
What are condominium fees?
Condominium fees, also known as co-ownership charges, are costs related to the management and maintenance of common areas in a condominium building. When you own a property in a condominium, you share the responsibility and costs of the common areas and services with other co-owners. These fees cover a variety of expenses necessary for the proper functioning of the condominium. They are discussed and voted on at the General Assembly.
Before detailing these costs, it is important to note that investing in a rental building allows for optimizing some of these expenses through economies of scale (pooling services, negotiating collective contracts, optimizing work).
A large part of these fees is also tax-deductible, such as property management fees, insurance, and other administration costs, cleaning of common areas, repair, and maintenance.
Here is what condominium fees can include:
– Maintenance of common areas (tax-deductible): Condominium fees generally cover the costs of maintaining and repairing common areas of the building, such as hallways, staircases, elevators, lobbies, gardens, and other shared facilities.
– Heating, electricity, and water for common areas: The costs related to energy consumption for common areas, including heating, electricity, and water, are often included in condominium fees.
– Condominium insurance (tax-deductible): Co-owners generally contribute to collective insurance for the condominium, covering common areas, the structure of the building, and sometimes even the condominium’s civil liability.
– Administrative management (tax-deductible): Condominium fees can also include costs related to the administrative management of the condominium, including the property management fees, holding of general meetings, management of administrative documents, etc.
– Security fees: If the building has security systems, such as surveillance or secure doors, the associated costs may be included in condominium fees.
– Reserve fund: Some condominium fees are intended to build a reserve fund to anticipate future repair or renovation work on common areas.
Condominium fees vary depending on several factors, such as the size of the building, location, available facilities, and the condominium’s management policy. Some of these fees can be recovered from the tenant. Choosing your investment wisely, especially in properties updated to the latest standards, helps to moderate and control these costs.
Knowing these additional costs is therefore essential to optimize your investment. Many of them are optimizable, deductible, or negotiable. Often exaggerated, these amounts are far from being a list of fixed fees. When anticipated, they can be managed.
To start your project calmly, it is recommended to surround yourself with real estate professionals familiar with these figures. PATRIMOLINK is at your service!
Content grouped for informational purposes does not replace current regulations. Without consulting our experts, PATRIMOLINK cannot be held responsible for any consequences resulting from the implementation of the advice and information provided in this article.
