Posts in category: Transactions

Latest transaction: €164,800 Loan for a property in Salies de Bearn.

salies

The profile

Buying in: Salies de Bearn, Pyrénées-Atlantiques
Property price:
€204,785
Mortgage amount: €164,800
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.00% fixed
Loan-to-value: 80%

The context

A Spanish-British couple wanted to purchase a holiday home close to the popular and historic 

seaside resort of Biarritz in the SW of France, a few miles from the Spanish border. They had struggled to obtain a mortgage because they were currently living in the USA where, despite being on temporary expat contracts, the US Revenue and Customs required them to fill in tax forms on their global assets. This created a number of reporting issues for several European lenders that they applied to, and the couple were soon snowed under with paperwork. Because of these complications, the number of banks left that the couple could still try and get a mortgage from was greatly reduced. 

Our approach

French Private Finance (FPF) was required to provide both UK and US tax returns to the lender – US tax returns being a lot more comprehensive than their UK counterparts. The bank was aware of the complex US Federal and State tax system, and were able to pick up the key elements in order to put the application through the bank’s compliance department.

Upon receiving the signed compromis de vente, it transpired that the property needed some small but urgent works. The lender agreed to finance these; however, they asked for a quote from a local contractor. In order to facilitate this, French Private Finance used their local knowledge to source several quotes, which proved satisfactory to the lender. 

Lastly, the clients needed to take out a life insurance policy, which is a requirement for most banks in France when taking out a mortgage. FPF used a specialist French insurance broker for this, because not all insurance companies in France are able to insure US residents. 

“Your home may be repossessed if you do not keep up repayments on your mortgage”  

“French private Finance Ltd is authorised and regulated by the Financial Conduct Authority”


Latest transaction: €390,000 property in the Var

cotignac-image

The profile

Buying in: Cotignac, Var
Property price:
€390,000
Mortgage amount: €331,500
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.40% fixed
Loan-to-value: 85%

The context

A couple from London was looking to buy a property in the South of France as a holiday retreat for the whole family. They had previously missed out on several properties as they were not able to secure a mortgage quickly enough, or they had lost out to cash buyers.

Eventually, they found a property in the small village of Cotignac. Although it was a little further away from the sea than they had originally anticipated, the property was still within an hour’s drive of the international airport at Marseille – as well as the beaches of Sainte Maxime and Saint Tropez. 

Our approach

The clients wanted to put down the smallest deposit they could, and also wanted to be sure that the mortgage would be fully paid off by the end of the term. They were keen on securing a mortgage as fast as possible – ideally before the school holidays. 

French Private Finance (FPF) initially investigated the possibility of a 25-year repayment mortgage. However, upon analysing the couple’s situation more closely, FPF recommended that the client reduce the duration to 20 years. Although the monthly instalments increased, the clients would ultimately save a considerable amount of interest over the duration of the mortgage. 

French Private Finance were able to do several things to ease the couple through the purchase, including helping them open a French bank account without them having to fly over to France. FPF were also able to help them find an alternative to the traditional way that French lenders operate. The banks usually require separate life insurance cover to be taken out with them or an approved partner, but in this case FPF used a UK-based insurance broker – and without the need for the couple to have to undergo medical examinations, a solution that was accepted by the lender. Another plus: UK insurance premiums are generally lower than in France.  

“Your home may be repossessed if you do not keep up repayments on your mortgage”  

“French private Finance Ltd is authorised and regulated by the Financial Conduct Authority”


How to Finance: €1.25 Million property in Sainte Maxime

guillaume-baudusseau-399124-unsplash

The profile

Buying in: Sainte Maxime
Property price:
€1,250,000
Mortgage amount: €700,000
Mortgage type: Interest Only
Mortgage term: 20 years
Interest rate: 2.45% fixed for the duration
Loan-to-value: 56%

The context

The client was buying a fabulous property in the south of France, near Ste Maxime. He had a few requests and FPF delivered:

  • Interest Only: check
  • Fixed rate for security: check
  • No life insurance: check (which is amazing on an interest only mortgage as the bank’s risk does not decrease over time)
  • Quick process: check

Our approach

From the first call to receiving the mortgage offer, it took only 23 days which is FPF’s absolute record (the average is about 100 days). The client was brilliant, the bank was efficient, and everyone pitched in and did the work!


How to Finance: €556,000 Mortgage in Mougins

valentin-b-kremer-1681580-unsplash

The profile

Buying in: Mougins
Property price:
€695,000
Amount: €556,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.45% fixed
Loan-to-value: 80%

The context

Singapore residents can generally obtain a max LTV of 60%. For this Partner of a top tier law firm, we increased the debt to purchase price ratio by showcasing his track record as an expat of a bespoke UK based LLP.

Our approach

Buying a property from abroad can seem lengthy and tiresome, particularly for busy professionals holding high level positions. However, our network can make it easy for you. It’s possible to do everything remotely, from applying for a loan to setting up a bank account and arranging a life insurance policy; FPF looks after everything until completion.

The client was very pleased with the ease of the process and introduced several friends and colleagues to FPF for advice.


How to Finance: €1,950,000 property in Grimaud

South of France

The Profile

Buying in: Grimaud, South of France
Property price:
€1,950,000
Mortgage amount: €1,365,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 1.70% fixed for the duration
Loan-to-value: 66%

The context

The client was buying in the south of France the house next to his family house. His profile was outstanding and his professional situation excellent. All the lights were green for an 80% Loan to value.

But there it is. It is not called loan to value for no reason. The survey from the bank came back lower than the purchase price for 2 reasons:

  • French banks are very conservative and risk averse. Should there be a default in the mortgage payment, the bank seizes the property and has to sell it to repay the mortgage. However, they take into account the location and the possible demand there would be and what price would allow a quick sale (within a month) which means the price would need to be dropped.
  • The renovation works to be made in the house were not adding as much in value as they were costing as they were mainly decoration work.

Overall, the bank decided to reduce their loan to value to 70% to limit their exposure based on the value that came back from their expert.

Our approach

Obviously, it came back as a shock to both us and the client. As mentioned above, the financial situation of the client was great so adding more deposit was officially not an issue. However it meant liquidating some assets and it created a bit of disbelief between the client and the bank.

In order to still provide the best possible deal for the client, we lifted our shirt sleeves and got to work. We managed to reduce the bank fees by 3 times and lower the rate of the mortgage from 2% to 1.7% on 20 years. For a mortgage of 1.365,000 €, that is a save of about 10,000 € on the bank fees and 46,000 € on the interest .


How to Finance: €2,861,600 mortgage in Paris

anthony-delanoix-152873-unsplash

The Profile

Buying in: Paris 8ème
Property price:
 €3,557,000
Mortgage amount: €2,861,600
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.54% fixed
Loan-to-value: 80%

The Context

Our client had a very good profile. However it was a bit difficult because he had withdrawn less funds from his Self-Employed activity than he had the previous years.

French mortgages are calculated on a DEBT TO INCOME ratio which generally cannot exceed 30-33%. That means that the total of your monthly commitments (personal loans, car loans, student loans, mortgages or rent) cannot exceed more than 30-33% of your monthly income.

Our client’s debt ratio actually reached 40%.

Our Approach

Thanks to our panel of banks, we managed to get THE French bank that would allow a debt ratio to exceed the 33% limit and go up to 45% depending on the profile, all this without requiring Assets Under Management (or collateral). The client ended up with a 80% loan to value mortgage (2,861,600 €) for a fixed rate of 2.54% on a repayment basis over 20 years.

Cerise sur le gâteau, we negotiated the bank fees to… 0€!


How to Finance: €659,400 mortgage in Courchevel

Courchevel

The Profile

Buying in: Courchevel, French Alps
Property price:
 €952,000
Mortgage amount: €659,400
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.15% fixed
Loan-to-value: 70%

The Context

Our client was a non-French resident living in London and buying a Residence de Tourisme in Courchevel.

Financing a residence de Tourisme can be harder than a normal freehold property with some banks refusing to finance this type of property because of the obligation to rent your property out a few weeks a year for many years (depending on the contract).

The client originally wanted an interest only mortgage so the rent could cover the mortgage repayment. However, Interest Only mortgages are not always available for the Residence de Tourisme developments, which was the case here. In addition, the client wanted to buy the property through a company to maximise his tax efficiency.

Our Approach

The client had to choose between a LTV of 70% over 20 years or 80% over 15 years. As he originally wanted a small repayment so that the rent could cover the payments,  it was a no brainer to pick the deal at 70% over 20 years (the rates were identical).


How to Finance: €510,000 property in Paris

paris

The Profile

Buying in: paris 11ème
Property price:
€510,000
Mortgage amount: €408,000
Mortgage type: Repayment
Mortgage term: 15 years
Interest rate: 1.80% fixed for the duration
Loan-to-value: 80%

The Context

The client wanted the highest LTV possible at the best possible rate as she was limited with her personal contribution since she had just paid off the mortgage on another secondary residence.      

The bank accepted to tick all of her boxes,  however it did  not accept to finance the real estate agents fees. These must be paid from the client’s personal funds.     

Our Approach

In order to reduce the deposit at its maximum, we asked the real estate agent and the vendor if we could re-write the compromis de vente and add the real estate agent fees to the purchase price. Though it increases a little bit the notary fees / mortgage tax and the amount of interest paid over 15 years (by a few thousands), it allowed the client to keep about 20,000 € of her personal funds at the moment of the purchase, funds she could allocate to actually decorate the property.

The client was very pleased by the solution as we answered her short term issue. The extra interest paid could be solved by repaying the mortgage early later on.


How to Finance: Mixed €900,000 Mortgage in Èze

Eze Village

The Profile

Buying in: Eze, South of France
Property price:
€900,000
Mortgage amount: €750,000 + €150,000
Mortgage type: Interest Only + Repayment
Mortgage term: 2 years IO + 7 years repayment
Interest rate: 2.3% fixed + 1.16% variable
Loan-to-value: 100%

The Context

The client was a retired Doctor who has some property investments in both the UK and France. He was eager to buy a new villa in a small village called Èze near Nice. He already had a mortgage-free property in the same town, but had decided to upgrade. He did not want to sell the existing property immediately as the rental of the property was going well.

Having discussed the options with the client’s existing bank, we confirmed that the bank could not offer an interest-only product as in their view the net assets in his portfolio were not sufficient to match their strict criteria. Furthermore, they refused to consider a mortgage on a 20 years on repayment basis as the client would be over 80 years old at the end of the term – the maximum repayment age. We tried decreasing the duration of the mortgage, however, it was not possible due to the affordability ratio.The shorter the duration, the more the monthly repayments. As a result, the criteria of below 40% debt ratio was not met to support the new mortgage.

Our Approach

At that moment, we decided to apply for a mortgage with a private bank in Monaco. The private bank in question has no limit on age criteria and they are more relaxed about a clients debt to income ratio. Here, the bank looks at all the committed expenditure vs income too, however, when the ‘rest-a-vivre’ is more than a couple of thousand pounds a month, the bank will be satisfied that the client has enough money left over.

The private bank we’ve worked with offered up to 100% LTV with a side investment of 30% to be deposited with the bank. We could also look at a short-term interest-only bridging loan, as the client is intending to sell his other apartment in the same village. Because of the so called ‘promesse de vente’, the bank was happy to lend on an interest-only basis as they were satisfied that this part would be paid off by the client when selling the property. This has been provisioned for 2 years with a possibility of extending for another 2 years if the criteria were met.

The charge that is put against the property to be purchased as well as up to 30% LTV of the loan amount is asked in cash collateral. This acts as an additional security, but the idea is that the bank can show the client how they can grow the invested capital with the bank. Private banks look for the longer term relationship with their client’s and want to impress the client with how they manage their portfolio.

In the end, we’ve managed to place the mortgage with the private lender on split basis where the majority of the loan was put on to a interest-only part on a two-year renewable deal. As long as there is a secondary property to be sold in the near future, the bank is happy to renew the deal at their discretion. The 7 year repayment had a low-start initial period of 2 years – essentially an interest-only period before the mortgage switches to repayment. After that the month payments were increased.


How to Finance: Paris 8ème and €370,000 Mortgage

Paris

The Profile

Buying in: Pqris 8ème
Property price:
€520,000
Mortgage amount: €370,000
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 1.35% fixed
Loan-to-value: 70%

The Context

Some banks, especially in the region of Paris, can be reluctant to work with non-residents.

They require the clients to have some history with France and a plan to live in France on the short-term. Basically, they have no issue financing a main residence but become hesitant for holiday home or investment properties. It is a shame as some banks have wonderful terms that could just create a whole new dimension on the Parisian property / finance market.

The client, a French entrepreneur who lives in the UK, was buying the last 2 floors of a Haussmann building to convert them into a duplex loft. The project was ambitious.

Our Approach

We were looking for the best rate possible at a high loan to value.

We have several contacts in Paris who could lend to our client with fixed rates ranging from 2% to 2.4% over 20 years. However, we found one who could offer 1.35% fixed for 20 years but solely to French nationals. We played the card that our client, though now living in the UK, was born and bred in France, that part of his business was made in France, that he already owned a couple of properties in France and last but not least, his father and grandfather each have had successful businesses in France. One could say that we provided the family tree, but guess what… it worked!

Having kept in touch with our client, he now informed us that he is selling the flat for 640,000 €. That is almost a 25% profit investment in less than 2 years. Well done sir!


How to Finance: €862,000 property in Courchevel

Courchevel

The Profile

Buying in: Courchevel, French Alps
Property price:
€862,000
Mortgage amount: €603,750
Mortgage type: Repayment
Mortgage term: 20 years
Interest rate: 2.15% fixed
Loan-to-value: 70%

The Context

The clients are avid skiers with a young family. They have been going to Courchevel for many years and dreamt of owning a property there for years. The project that our clients decided to buy was an off-plan property with a rental option included. This rental option meant that the clients signed a lease with the property developer where they are going to manage and rent out the property for 9 years. This is even more popular practice in the French Alps, because the local authorities fear the investors will not want to rent out their properties in already supply-deprived ski resorts. This is why a percentage of these properties will be sold with a lease.

Whilst these practices ensure a steady increase of beds in the resorts, it is generally met with a more conservative approach from the lenders. They put the management companies through a scrutiny to see how they have managed properties previously. Their concern is that the property and project must retain, if not increase, in value over time. Moreover, in an event of a client default, it is much harder for them to sell a property with rental obligation or lease attached. This is the main reason why some banks choose not to lend on projects where the property developers and/or management companies are deemed not to have sufficient track record.

Our Approach

The client had more leeway in terms of deposit than usual and so we were able to secure financing on 70% LTV of the pre-VAT price. This means that the client had to put down a little bit more up front, but the overall mortgage was on the pre-tax price as the rest is organised by the developer. This meant that the mortgage amount was smaller and the repayments less, which in turn means that the mortgage payment is close to being covered by the income from the rental.


How to Finance: Saint Gervais and €280,000 mortgage

Saint Gervais

The Profile

Buying in: Saint Gervais
Property price:
€400,000
Mortgage amount: €280,000
Mortgage type: Interest Only + Repayment
Mortgage term: 20 years
Interest rate: 2.05% variable
Loan-to-value: 70%

The Context

This property professional borrower was looking to buy a piece of land and undertake a substantial new build project. The bank was asking for all the signed renovation contracts from each builder before printing the mortgage offer as it liked to have a good understanding of the whole project before releasing its funds. However, some works were only going to start  in 6 months time so the client could not/did not want to decide and provide these quotes before purchasing the land and getting started with the groundworks.

Our approach

With the clock ticking, and the risk of the property slipping through his fingers, we decided to finance the purchase of the land now and deal with the financing of the build later on. For this we required a bank that is happy to finance land only, which is a rare breed.

The client chose a mixed mortgage on a variable rate. For the first 7 years, the loan is on an Interest Only basis. After 7 years, the loan switches to a Repayment Mortgage over 13 years. As the client had other financial commitments, we wanted to keep the outgoings as low as possible on the French mortgage while still applying for the highest mortgage amount to help reduce any perceived loss on the exchange rate. This was made possible thanks to the interest only part and the high loan to value. The monthly payment on the repayment part of the loan was quite high but as the client would have paid off other loans before it kicks in, he was happy to proceed on this basis.


How to Finance: €285,000 Mortgage in Cannes

Cannes

The Profile

Buying in: Cannes, South of France
Property price:
€475,000
Mortgage amount: €285,000
Mortgage type: Interest Only
Mortgage term: 7 years
Interest rate: 2.55% fixed
Loan-to-value: 60%

The Context

This retired private equity investor was concerned about his ability to secure a mortgage with a French bank. With multiple income streams including remuneration as a board member of 3 different companies, he had heard about how strict French banks can be on borrowers with complex financial affairs.

Our Approach

FPF went the extra mile to ensure the file was presented in the simplest manner to the lender. This meant a lot of back and forth with the client to ensure it was easy to understand for a foreign bank. The analyst had no questions on the application, a dream come true for any broker in the world of French credit risk assessment. The client was delighted with the speed of the application once we had the application in order.

Furthermore, the property agent was impressed by our level of service as we kept him updated throughout. He went on to sign a partnership agreement with French Private Finance.


Tourrettes-sur-Loup / South of France: €1,172,325 Mortgage, 70% LTV, Variable Repayment, 1.75% capped, 15years

Tourrettes-sur-loup

The Profile

Property price: €1,674,750
Buying in: Tourrettes-sur-Loup
Mortgage Amount: €1,172,325
LTV: 70%
Type: Variable Repayment
Rate: 1.75% capped at + 1% for the first 7 years
Term: 15years

The context

Having made a gentleman’s agreement to pay the vendors in Sterling, speed was of paramount importance to this HNWI.

Our approach

We applied for 70% LTV to waive the life insurance requirement and secure the offer in just over a month.

The standard mortgage in France is a 20 year repayment fixed rate. However, our advice was to go for a 15 year term to reduce total interest paid. Such adjustment can easily save borrowers tens of thousands. So, it is definitely worth looking at shorter durations for second purchases when income is available.

Furthermore, the client opted for a variable rate to not have any early repayment charges. The capped rate allows you to reap the benefits of low interest rate while still providing security against future interest rate movements.


Finding a solution for a HNWI buying off-plan in the Trois Vallées, French Alps

French Alps

The Profile

Property price: €1,720,000
Buying in: Courchevel
Mortgage amount: €1,720,000
Loan To Value: 100%
Mortgage type: Fixed Repayment
Rate: 2.15%
Collateral: 30%
Term: 15 years

For HNW clients, it is worth considering a private banking loan. Generally, the lender will finance 100% of the purchase price and require AUM (Asset Under Management) as collateral. The industry standard is €1m in lending in value. In fact, private banks are in the asset management business; hence, the loan is mainly a way to attract HNWI with the goal of extending the relationship.

Our Approach

We have several contacts with private banks where barriers to entry are less exclusive. Also, these banks can finance VEFA (off-plan property projects) which is rare in the private banking world. One of them was a great fit for this Ultra HNW client looking to buy an apartment from a prestigious developer in the Alps.
With over €85m of real estate investments and complex financial affairs overall, we could not apply for a classic loan with a French retail lender because they lack the know-how, and would not be comfortable lending when the borrower’s profile is not straight forward as well as the fact that the paperwork burden would be excessive. In contrast, private banks focus on the big picture. That’s not to say that they do not do their due diligence but the additional collateral gives peace of mind to the bank. In this case, it took 4 months for them to issue the mortgage offer.

The Process

Having done much larger property deals, the client was getting concerned at times throughout the process. However, it is no secret that things move slow in France and the process generally takes longer for non-resident buyers, especially when their situation is outside the box. By maintaining constant communication with the client and educating him on the underwriting process, French Private Finance kept his trust throughout and he was very pleased after meeting with the private banker.
The client opted for the security of a long term fixed rate mortgage as this is one of the most attractive options available in France.