All 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.

Tout savoir sur les appels de fonds

3 questions for a better understanding of stage payments

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Un paiement étalé dans le temps

Question 1

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 1st to the notary then to MGM up to the handover of your apartment.

Question 2

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.

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Des appels de fonds, à quel rythme ?
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Quels sont les montants à prévoir ?

Question 3

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.

Illustration - Résidence de tourisme​ 

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


Illustration - Copropriété classique

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

Trait

STAGE PAYMENTS

What effect on the release of the loan?

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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).

 

To limit the impact of the loan and not to put a strain on the purchaser’s budget during the construction, the bank can suggest:

  1. 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.
     
  2. 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.

 

Trait

 

 

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