Real estate loan to buy off-plan (or off plan)
You want to buy a new property . Whether it’s a main residence or a rental investment, this acquisition is special since you buy a property that by definition does not exist yet. In the case of the sale in the future state of completion known as VEFA (or purchase on plan), your financing plan will be adapted.
1. The specifics of a purchase in the new
Advantages and disadvantages of a purchase in the new
Acquiring a new property can seem risky . In fact, you do not know what the property will look like and you usually have to wait a year or more before you can move in or rent out. In addition, a risk always weighs on the quality and the seriousness of the manufacturers and on the result obtained.
But buying in the new also has advantages.
- Financial benefits:
- You will not have to finance renovations during the first years
- New homes are necessarily up to standard (technical safety, sound and heat insulation). Thermal insulation will help you reduce your energy consumption.
- In addition, the notary fees are about half as important as for a purchase in the old ~ 4% vs.. 8%).
- Tax benefits:
- You benefit from an exemption from the property tax during the first two years following the handing over of keys.
- In the case of a rental investment , a tax reduction is granted.
What is the VEFA?
The VEFA (a sale in the future state of completion) allows to acquire a new property that will be built or is under construction. This is generally the case with purchases from real estate developers.
In the case of VEFA, the sale of the property and the land is grouped together. You do not need to find building land, the builder takes care of it. In case you find yourself the ground to build, you will go through the CCMI .
In addition, the promoter has the property damage and commitment guarantees of perfect completion: you are therefore protected against poor workmanship. These warranties are valid for 2 years for the second work and 10 years for damages calling into question the structure of the building.
2. Booking contract
You will sign a reservation contract with the real estate developer. This contract stipulates what are the characteristics of the housing, its price, the date of final signing at the notary and the date of delivery. This is not the authentic act but the presence of a notary is preferable.
The price of the property mentioned in the VEFA reservation contract can be:
- Farm: the price will not change. This is not often the case.
- Forecasting: It is possible that the final price of the good increases. In this case, you can cancel the order.
- Revisable: changes in the price of the good are possible but they are limited to 70% of the BT01 index.
At the signing of the reservation contract, you will pay a deposit for the reservation of the property of about 5%. As after the signing of the promise of sale , you have a period of retraction of 7 days during which no justification is required. After this period, you can retract but risk losing the deposit if none of the conditions precedent achieves.
The conditions precedent in the contract are therefore very important. They may be related to getting your loan. If you do not get a loan, the amount paid as a deposit will be refunded. In addition, certain conditions precedent may be linked to the building and contractual commitments. Indeed, as soon as features are present in the reservation contract, the promoter has a duty to render.
3. Progressive release of funds in VEFA
For the VEFA, the funds will be released as the work progresses and until the end of the work (percentage defined for the law). You do not have to worry about payments. The promoter provides the bank with proof of progress at each step. The levels of release of the funds are defined as below:
- 5% upon signing the booking contract
- 10% at the opening of the site
- 10% upon completion of the foundations
- 15% at the completion of the walls
- 20% out of water
- 15% at the completion of the bulkheads and the shutdown
- 20% upon completion of equipment, plumbing, carpentry and heating.
- 5% at the handing over of the keys. You can refuse to pay the remaining 5% if there is a problem.
4. Adapted terms of repayment
In VEFA, you repay the capital only when all the funds have been released. In other words, depreciation begins when you have the keys to your property.
Throughout the construction period, you pay for insurance and interim interest . These interests are at the loan rate and in proportion to the amount released . These interests increase as construction progresses. They are in addition to your loan interest and therefore an additional cost compared to conventional loans.
The first unblocked amounts will be covered, at most, by your contribution to reduce this interest .
In case you have multiple loan lines or loans assisted, the loans with the lowest rates will be unlocked first.
We consider the same loan as the graphs above, with a contribution of € 25,000. If you benefit from a PTZ in the amount of € 40,000, it will be released immediately after your contribution and will be used to cover the calls for funds until the 15th month. Your principal loan at 1.2% will be unlocked from the 20th month. Before that you will not pay any interest.
Attention: you will pay the insurance and the guarantee of all the loans from the beginning.
When the construction is finished, you no longer pay interest. You then start the classic repayment of your loan.
Conscious of the particularity of these acquisitions, the banks offer several repayment flexibilities:
- Report of maturity : in the case of a rental investment, finding a tenant may take some time. You can postpone the start of repayment for a few months.
- Deferred interim interest: if you prefer to pay the interim interest at the time of receipt of the good, it is possible for 2 years maximum. Be careful, this will increase the total cost of credit.