Everything you need to know about stage payments

When you choose to purchase a new build property, payment is made in instalments corresponding to the progress of the construction. A look at the ins and outs of a funding mechanism specific to the purchase off plan: stage payments.

3 questions for a better understanding of stage payments

Payment in instalments. Why?

Purchasing off plan is investing in a new build property which is at the planning stage. Unlike purchasing an existing property, the purchase is not paid for in a single payment on signature before the notary, but in successive instalments, the 1^st to the notary then to MGM up to the handover of your apartment.

Stage payments, how frequent?

From the signature of the definitive deed of purchase right up to the handover day, stage payments are made in line with a payment schedule which follows the various stages in the progress of construction. The steps which trigger stage payments are regulated by law.

What sums must be provided for?

The amounts of the stage payments are regulated by the Code de la Construction et de l’habitation (residential property construction legislation) and correspond to a percentage of the overall price of the new build apartment purchased off plan.

RÉSIDENCE DE TOURISME

When purchasing the property as a résidence de tourisme the sums due are 84 % of the total price inclusive of all taxes payable as follows:

5% on reservation of the property if delivery is to take place within a year (2% if it is to take place within 2 years)
30% on completion of the foundations
30% on laying the first floor slab
5% on completion of the roof
The balance, 14%, is paid on installation of the windows and doors
On completion the Trésor Public (public revenue department) will pay the outstanding 16% in respect of the VAT refund via the notary’s accounts department

STANDARD CO-OWNERSHIP FORMAT

When purchasing the property under the standard co-ownership format the sums due are 100 % of the total price payable as follows:

5% on reservation of the property if delivery is to take place within a year (2% if it is to take place within 2 years)
30% on completion of the foundations
30% on laying the first floor slab
5% on completion of the roof
20% on the installation of the windows and doors
5% when construction is complete
The balance, 5% is paid on handover

STAGE PAYMENTS

What effect on the release of the loan?

MGM TELLS YOU EVERYTHING

When the purchase of a new build apartment is funded by a bank loan, the bank, in accordance with the regulations, will release the loan in several instalments to correspond with the stage payments.

The purchaser must then begin to make the monthly repayments relative to the amount drawn down, even though they are not yet in possession on the property (either to occupy it in the case of the purchase of principal residence or to let it in the case of a rental investment).

That they only pay the interest due on the sum drawn down until the apartment is handed over, with capital repayments only commencing once the entire sum is drawn down. In this case, the interest due during the construction, called interim interest, is added to the initial cost of the property loan.
Postponing repayments (capital and interest) until handover, once the entire loan has been drawn down, but at a higher rate of interest (incorporating the interim interest). In both cases, the facilities granted make the purchase-off-plan loan more expensive than a standard property loan. To avoid interim interest, some banks offer to split the loan into several loans, each one corresponding to a stage payment. Each loan will thus be fully drawn down in a single tranche and will be repayable accordingly without incurring additional interest.

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