Scenario 1 - An example of a new build purchase

Buy a 1 bedroom fully furnished holiday house in Languedoc. Perfect if you are looking for your Mediterranean retreat in a beautiful location near the coast.

The price with VAT and furniture package is 83,600 euro. The guaranteed rental income received under the leaseback scheme will vary according to which option you choose.

The highest income will be achieved when you agree to let your property for the summer, end of June to beginning of September. The income is 2,100 euro p.a. You can also use your property for up to six months throughout the rest of the year for yourself and close family members.

If you let your property during the rest of the year, you will receive approximately 60% of whatever your house generates. This could be especially fruitful during holiday periods such as Easter and half-term breaks.

An example of financing this purchase

Option no. 1

  • A French mortgage for 80% leaves you having to fund the 20% deposit (16,720 euro) and the notary fees (estimated at 3,300 euro) yourself. However, the interesting part is that when the French VAT (worth 13,700 euro) is refunded post completion, you get to keep it and spend it how you wish (and perhaps reinvest it in another French leaseback property!).
  • Take the VAT rebate away from your purchase costs of 20,020 euro, this means that you will have only invested 6,320 euro or £4,400. Monthly repayments would be 345 euro and life assurance 13 euro per month.
  • Your annual outgoings are 4,296 euro. Once you take into account the 2,100 euro guaranteed rental income for the summer months, your holiday home will only be costing you 183 euro per month: just £126 per month!

Option no. 2

If you have a lower cash contribution initially available, the second option allows you to buy with a 100% mortgage. Repayable over 25 years, the loan covers the property, VAT and furniture.

Your only contribution would be towards the life assurance, which is paid in one lump sum worth 4,100 euro.

You pay this on the acceptance of your mortgage. You also pay for the notary fees at 3,300 euro. In total your cash investment and costs amount to 7,100 euro or £5,103.

The VAT rebate, once received would be transferred straight to the mortgage. Monthly repayments would be 432 euro or £298 per month. Factor in the guaranteed rental income and this takes the monthly cost down to 257 euro, or £177 per month.

Another way of looking at new build. Let’s assume you can release £70,000 to invest in a property.

Back to Examples List | Back to top