Posts in category: Transaction of the month

December 2017 – French mortgage transaction of the month

What’s going on here?

Interest-only French mortgages are still a popular product for customers wishing to purchase properties in high-demand areas such as the French Alps and the French Riviera. This was the case for a customer who decided to purchase a house in a new development in Nice, southern France.

The €2.2 million house boasts stunning views of the bay with great links to the city centre and the airport. The customer opted for a 50-50 split on an interest-only mortgage. One part being at a variable rate of 2.4% and the second on a 2.75% fixed rate; both over a 14-year period.

The product

In this month’s French mortgage transaction of the month we can see the advantages of taking an interest-only mortgage are numerous. For example, low monthly instalments which can in turn maximise profits from potential rental income. Because of the low interest rates across the eurozone, it makes sense to use this opportunity of taking a smaller variable rate. It is a fair bet since recent news showed that the European Central Bank (ECB) isn’t in a rush to take its foot off the pedal on Quantitative Easing (QE) for at least another year, as we pointed out earlier this month. This brings confidence to French mortgage seekers that the golden period of low rates is likely to continue for some time.

For added peace of mind, the client decided to secure a favourable rate of 2.75% on the second half of the mortgage for the full duration of the mortgage. This is a smart way of locking up a low interest rate ensuring that they will know the exact amount of the monthly instalments for this part of French mortgage. In France it is possible to fix rates for longer periods of time than in the UK, because the banks across the Channel look for a long-term commitment over a short-term profit from their clients.

The bigger picture

The combination of the two products gives the client a great deal of flexibility with low rates on both variable and fixed terms. If the costs were to rise dramatically over the coming years, the client could opt to pay off the variable part of the mortgage early. In this case they would avoid  paying any early repayment penalty fees and see off the other half of the loan at the fixed rate.


April 2017 – French Mortgage Transaction of the Month

This month we look at an booming sector of the French mortgage industry – re-financing.

Whilst technically this one isn’t a done deal yet (and therefore not truly a transaction), we wanted to highlight it as it demonstrates the incredible savings French property owners are currently making on their total long term interest amount by re-financing their properties while the rates are low.

The client, an owner of a three-bedroom ski apartment in the Portes du Soleil still had €640,000 remaining on his mortgage. The original product was a long term fixed rate repayment mortgage over 20 years, but as it was secured back in 2012 the rate was substantially higher, at 3.2%.

Using our contacts with a local bank and based on his profile we managed to secure him a market-beating rate of 1.7% fixed over 20 years on a repayment, no far off half the rate he was on previously.

Local banks are notoriously hard to find and work with, which means having a specialist broker navigate the process exponentially increases the chances of a better deal for those re-financing or even new entrants in the French property market.


March 2017 – French Mortgage Transaction of the Month

Whilst the average duration of a French mortgage taken by a non-resident is 20 years, often clients end up choosing to gear their mortgage in France towards a longer term product to ease the process of buying another property in France.

In this month’s French mortgage transaction of the month, the client, a 48 year old buying a €640,000 ski apartment in Courchevel opted for a fixed rate repayment mortgage to be spread over 25 years at a rate of 2.45%. Over a duration of this length the maximum loan-to-value rate is 80%, therefore requiring a 20% deposit.

Most of the time clients utilising French mortgage products with durations longer than 20 years are asked to do so to improve their affordability calculations (increasing the duration spreads out the mortgage repayments, thus reducing them, in turn for a slightly higher rate).

However, with rates being so low across the board, especially compared to those available elsewhere in Europe (particularly in the UK) occasionally clients opt for longer terms regardless of the slightly higher rate. Why? Sometimes it’s in order to maintain a preferred level of disposable income, but mostly it’s with a longer game plan in mind.

By taking a longer term and therefore having lower monthly payments, the affordability profile is better than it would be on a mortgage with a shorter duration, thus substantially increasing the chances of being granted additional lending on another property investment.

In real terms, per €100,000 borrowed, the monthly cost of a 25 year fixed rate repayment mortgage (at 2.45%) is around €446, compared to the 20 year fixe rate repayment mortgage (at 2.15%) monthly cost of €513, a difference of €67 per month per €100,000 borrowed. Using the Courchevel example above, the property of €640,000 had a loan of €512,000 (at 80% LTV), which equated to a monthly payment difference of around €343 between the two products, or just over €4,100 a year.

For further information on French mortgages and how to calculate your affordability for a French mortgage please get in touch with one of the team.


February 2017 – French Mortgage Transaction of the Month

This month’s French mortgage transaction of the month highlights the renewed trend of international clients taking mixed French mortgages; half repayment, half interest only, instead of simply repayment only.

Mixed French mortgages are a clever way of reducing the amount of interest you pay overall by structuring your mortgage in a way that enables early repayments without paying the sometimes-costly early repayment fees that are associated with long term fixed rate repayment mortgages.

Interest only French mortgages often allow for early repayments without penalty fees, so by taking half of the overall lending on an interest only product over 14 years, the buyer has a large chunk of the lending which can be paid off early.

It was this structure that a client opted for recently for an €800,000 three bedroom apartment in the Portes du Soleil, in a resort that’s very popular with the British.

In addition to having the ability to pay some of the mortgage off early, the client also preferred that the overall monthly repayments would be lower, due to the lower monthly payments on the interest only part of the mortgage.

This trend is often an indication of positivity in the financial circuits, with those opting for a mixed mortgage often expecting a windfall from bonuses. Though we often see buyers selling an existing property elsewhere to facilitate this.

To see if a mixed French mortgage could work for you, please feel free to get in touch with one of our French mortgage experts today.


January 2017 – French Mortgage Transaction of the Month

Going against the grain of the seasons, this month’s French mortgage transaction of the month takes us away from the wintery alps, to the warmer climes of Dubai and Cannes.

This was the third purchase in the last year by our client, who is based in Dubai and has moved quickly to secure rates whilst they’re at their lowest.

Unlike the first two properties, which were in the Three Valleys ski resort of Méribel, this one was in sunny Cannes at a price of €1.8m with a 60% LTV securing a loan of €1.08m. This was over a 25 year fixed period on a repayment basis, with a rate of 2.45%.

We often speak to clients based in the Middle East who’ve had trouble accessing French property finance as banks sometimes feel less secure about lending to someone far away.

There’s a simple solution though – investing through an SARL. An SARL or Société à Responsibilité Limitée, is a limited liability company, particularly suited to small/medium family-run businesses. By starting an SARL you are creating an official company registered in the French tax system, which at the most basic level simply means that when a Bank sends you correspondence, they have an official address, not a personal one, that they can know 100% that correspondence will be delivered to. It is then the business owners responsibility to make sure they pick up their mail.

With this of course there is also the normal full due diligence carried out through the full application process.

For further information on buying French property through an SARL or French mortgages in general, please get in touch.


November 2016 – French Mortgage Transaction of the Month

If USD buyers are currently enjoying unprecedented buying conditions in France, then for Sterling things have tempered, mainly due to the weakening of the pound.

However some buyers are still pushing ahead, citing the fluidity of the market as the main impulse for buying. One recent purchaser who has just reserved a three bedroom apartment in Châtel in the French Alps knew that even though the currency rate isn’t on his side, it made sense to move ahead quickly.

“The pound might be down, but for buyers in euros that doesn’t matter,” said Mr Jackson, of Aintree, UK. “The French and Dutch are still buying, as are the rest of the Europeans. They’re looking for opportunities where Brits have fallen out of the market. From what we experienced, ski resorts are still buyers’ markets and opportunities do not hang around for ever. We therefore decided to take the hit on the pound and it was softened anyway by a low long fixed rate. We took an 85% loan to value and may pay some of it off earlier if the currency shifts back over the next 12 months.”

To talk about your options and how to plan around the recent shift in currencies, please get in touch with one of our French mortgage experts today.


June 2016 – French Mortgage Transaction of the Month

USD buyer utilises double benefit of mortgage & currency rates

A late entry for June’s transaction of the month. Strictly speaking, this is still a pending transaction but we had to showcase it simply due to the huge value in the numbers.

Our client, based in the UAE (where the Dirham is pegged to the dollar) had his buying power boosted by 4% on the euro overnight after the referendum. Even before the Brexit referendum announcement, USD had become over 22% stronger on the euro since this time in 2014.

Whilst fixed rates for non-residents across the board are now down to around 2.15%, if the property is in Paris it is possible to negotiate even lower rates. French banks often feel more secure about lending on real estate that is located in markets that have strong domestic and international appeal. Paris is at the top of this list, closely followed by large resorts in the French Alps, where tourism underpins the market.

We are negotiating a rate for him of 1.55% fixed for 20 years with a loan to value rate of 80%. The loan value is around €600,000 and his ability to move quick on both the currency and mortgage rates is going to secure him huge amounts of value over both the short and long term.

For those looking at buying property in Paris, these preferential rates are dependent on the buying profile. Generally as a couple, gross income needs to be in the region of €100,000, with a single applicant requiring €70,000 income before outgoings. Working for a large internationally-known corporation is also prerequisite.


May 2016 – French Mortgage Transaction of the Month

Cash buyers use finance to optimise tax & repayment structures

With French mortgage rates so low, even those with enough cash to be able to buy outright are using finance to purchase their properties.

May’s French mortgage transaction of the month is on a large apartment in the Three Valleys ski region. The clients opted for an interest only route on a loan amount of €800,000 for two reasons. Firstly they wanted to keep their net assets in France down to a minimum. They were planning other investments in the country in the future and this would mean the €1.3m net asset level where French wealth tax would kick in would be reached fairly soon without careful planning.

The second reason was to keep the monthly costs down. On a repayment basis the monthly amount would have been around €6,000, compared to around €2,0000 per month under an interest only structure.

This interest only mortgage was also divided in two, one half on a fixed rate the other on a variable rate. Whilst a fixed rate gave them security over their payments in the long term, they wanted to have the option to repay parts of the capital early, which under a fixed product means extra fees. They therefore took 50% of the mortgage under a variable product. Whilst there is less security over the rate long term, this allows for early repayments.


April 2016 – French Mortgage Transaction of the Month

Hedging against currency movements

The euro’s movement against both the pound and the dollar over the past few months has led many French property to utilise the long term rates as a hedge against further currency movements.

Whilst one of our current clients – who is buying an €800,000 apartment in Courchevel – has enough cash to finance the purchase outright, he does not want all the cash to be exposed to currency fluctuations.

He chose a long term fixed rate mortgage on a term of 15 years for 75% of the property value thereby only exposing 25% to currency fluctuations.


March 2016 – French Mortgage Transaction of the Month

Buyers choose 50/50 interest only & repayment mortgages

The lure of an interest only mortgage is normally the low monthly payments, but with long-term French mortgage rates so low, many clients are opting for a mixed interest only and repayment set up.

A 50/50 arrangement this way provides a combination of both low monthly payments and some relative long-term security provided by the 20-25 year fixed rate mortgage options.

As interest only loans in France often require foreign buyers to have net assets to the same value of the requested loan amount, buyers can sometimes fail when it comes to affordability. The 50/50 solution therefore provides them with a way of accessing the interest only market.


February 2016 – French Mortgage Transaction of the Month

HNW buyers also opting for 20-year fix, but banks prefer company structure

As we explained last month, the most popular product with non-residents is the 20-year fixed repayment mortgage at 2.70% at a loan to value of 80% and this trend remains the same. However, it’s not just the core range of buyers in the €400,000-€800,000 budget range that are opting for this product. International buyers with much larger budgets are utilising this long-term value too.

February’s transaction of the month is for a €3.7m chalet in The 3 Valleys on the 20-year fixed mortgage at 2.70%. This client bought using a company structure, which is common amongst high price purchases as it can be much more favourable when is comes to taxation. A company structure can greatly reduce wealth tax exposure and is very flexible when it comes to inheritance tax as children can be given shares at little or not cost to the property (or company) owner.

Using a company structure for a bigger loan amount also gives banks a little more confidence. This is largely due to the simple fact that they can send any statements or important correspondence to a registered French address, rather than one overseas.


January 2016 – French Mortgage Transaction of the Month

The huge amounts of long term value currently available in the French mortgage market are pushing those with a long term view to stretch their loan duration to the maximum possible length.

This month’s French mortgage transaction of the month is an example of the long term game some buyers are playing. The client, 40 years old, was buying a €540,000 property in the Portes du Soleil region of the French Alps. He had enough capital to put upfront in order to reduce the duration of the loan but wanted to keep this capital available.

By taking a 25 year fixed rate mortgage at 2.90% on a repayment basis, the client was able to know exactly what he would be paying each month as he nears retirement and could therefore arrange his other finances and investments to suit this plan.


December 2015 – French Mortgage Transaction of the Month

Just like this month’s area guide, our transaction of the month takes us to Chatel in the Les Portes du Soleil. Here a client wanted to utilise the value currently available across the mortgage market to suit his own long terms plans.

On a property value of around €530,000 the client opted for a split mortgage across two loans; one variable at +1.90% above the 3 month Euribor (after being fixed at 2.5% for three months), with the other half on a repayment mortgage.

Most clients opting for such mixed finance arrangements are do so when they plan to pay a bulk of the loan off early. Variable mortgage products are much more flexible for such a purpose, but of course do not come with the same levels of security over the rates long term, hence decision to choose a mixed mortgage. Overall the loan to value here was around 80%.


November 2015 – French Mortgage Transaction of the Month

Whilst the 3 month euribor has remained in the negative there is a sense that rates may fall further, yet this has not stopped the appetite for the current 20 year fixed-rate mortgage product.

At 2.70% the average monthly repayment cost per £100,000 borrowed is £535, which for a product over 20 years shows huge value. This is the highlighted product for this month’s French mortgage transaction of the month.

The client from Staffordshire, England, borrowed €380,000 at a loan to value of 80% on a classic freehold apartment in Méribel in the 3 Valleys ski region of the French Alps.

The client could have borrowed less, having enough personal contribution to lower the loan to value, however with French mortgage rates so low he decided to use the additional money for a furniture pack instead.


October 2015 – French Mortgage Transaction of the Month

This month we broke a new record! The average French mortgage loan takes around two months to go through, but this month’s French mortgage transaction of the month shows that it can actually happen in less than two weeks.

Now we will admit that the loan to value was lower than normal – at around 35% – but the speed at which this variable interest only loan (at 2.30%) was secured was mostly to do with the efficiency applied to the paperwork.

After having received their decision in principle, the client’s required documents were supplied to us quickly (almost in a matter of hours) thus enabling us to move very swiftly on the full application.

For further information on the French Mortgage Process please follow this link or alternatively speak to one of our advisers.