Posts in category: Transactions

Èze / South of France: €900,000 Mortgage, 100% LTV, Mixed Interest Only and Repayment, 2.3% fixed and 1.16% variable, 9 years

Eze Village

The Profile

Buying in: Èze, South of France
Property price: €900,000
Loan amount 1 interest only: €750,000
Loan amount 2 repayment : €150,000
Type: Part Interest only & Part repayment
Rate: 2.3% Fixed + 1.16% variable
Loan To Value: 100%
Term: 2 year interest only + 7 years repayment with 2 years on low start repayments

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.


Paris 8ème: €370,000 Mortgage, 70% LTV, Fixed Repayment, 1.35%, 20 years

Paris

The Profile

Property price: €520,000
Buying in: Paris 8ème
Mortgage amount: €370,000
LTV: 70%
Mortgage type: Repayment
Rate: 1.35% Fixed
Term: 20 years

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!


Courchevel / French Alps: €603,750 Mortgage, 70% LTV, Fixed Repayment, 2.15% for 20years

Courchevel

The Profile

Property price: €862,000
Buying in: Courchevel
Loan Amount: €603,750
LTV: 70%
Mortgage Type: Fixed Repayment
Interest Rate: 2.15%
Mortgage Term: 20 years

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.


Saint Gervais / French Alps: €280,000 Mortgage, 70% LTV, Fixed mixed Interest Only & Repayment, 2.05% for 20years

Saint Gervais

The Profile

Property price: €400,000
Buying in: Saint Gervais
Mortgage Amount: €280,000
LTV: 70%
Type: Interest only mortgage transitioning to repayment after 7 years
Rate: 2.05% Variable
Term: 20 years

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.


Cannes / South of France: €285,000 Mortgage, 60% LTV, Fixed Interest Only, 2.55%, 7 years

Cannes

The Profile

Property price: €475,000
Buying in: Cannes
Mortgage Amount: €285,000
LTV: 60%
Type: Fixed Interest Only
Rate: 2.55%
Term: 7 years

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.


Méribel / French Alps: €945,000 Mortgage, 50% LTV, Fixed Repayment, 1.95% for 15years

MERIBEL

The profile

Property price: €1,890,000
Buying in: Méribel, French Alps
Mortgage Amount: €945,000
LTV: 50%
Type: Fixed Repayment
Term: 15years
Rate: 1.95%

The Context

For all purchases valued over €1.3m in France, you might be liable for the wealth tax – now based on the property value only rather than your total assets based in France since the changes in legislation in 2017.

The calculation for how much you will pay in tax is based on your equity in the property. Hence, potential cash buyers may consider taking a loan out against the property to reduce the equity in the property. Whilst a loan is usually more expensive than the cost of the wealth tax, there are additional benefits to taking out the loan particularly for a currency hedge or if the property is to be rented out, the interest only the loan is usually tax deductible.

More in depth information on the Import sur la fortune immobilière can be found here

Our client choose both a mortgage and an SARL de famille for the acquisition. His intention was to have his children has shareholders so that he has a tax efficient way to transmit the property to his children in the future. However, children can only own a very small percentage of the company and must be able to afford their share of the loan if they are adults.

Our approach

Therefore, after discussions with an accountant the client decided buy as a joint shareholder with his wife for the purpose of the mortgage application. The clients always have the option to transfer shares to their children later on at a small cost particularly as the equity transfer is low while the mortgage is in place.

The mortgage we put in place was a long term fixed rate to keep the risks and interest costs down, with a low level of loan to value which meant the rental income would come close to paying the mortgage costs.

FPF work very closely with a notary in the French Alps who can assist you in setting up a company, opening a French bank account and arrange a power of attorney to sign on your behalf as well as accountants and tax advisers to help optimise your purchase in France


Eze / South of France: €900,000 Mortgage, 100% LTV, Mixed Interest Only and Repayment, 2.3% fixed and 1.16% variable, 9 years

Eze South of France

The Profile

Property price: €900,000
Buying in: Eze
Mortgage amount 1: €750,000 interest only
Mortgage amount 2: €150,000 repayment
LTV: 100%
Type: Part Interest only & Part repayment
Rate: 2.3% Fixed + 1.16% variable
Term: 2 year interest only + 7 years repayment with 2 years on low start repayments

The Context

The client is 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 town 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.

The client was already banking with a large French retail bank with a branch in Nice. However, he struggled to obtain an interest-only mortgage as he did not have enough net assets. This only left us with a capital & interest repayment option and the main initial concern for the lender was the client’s age. He asked us for help with speaking to the head office of his existing bank.

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 their attitude to debt to income ratio is more relaxed. 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.

Moreover, speed was of the essence as the client had little time to complete the purchase after fruitless application with his original bank. Here, the private banker asked for far less documents when compared to retail banking counterparts thus, speeding up the process.

This private bank offers up to 100% LTV with a side investment of 30% to be deposited with the bank. Moreover, we could 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.

With the private bank, a charge 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.


September 2018 – French mortgage transaction of the month

French-ski-chalet-French-mortgage

This month’s French mortgage transaction of the month involved an unusual situation where this British captain of industry was purchasing the completed shell in Meribel for €2.4m with an additional amount of €1.2m to be funded for the fitting out of the interiors.

Usually, this type of construction is either carried out using one provider, however, in this case, the client had to reserve the property before the shell was complete and before all the estimates for the building work had been obtained, therefore increasing the number of parties involved and making it more complicated as a result.

We worked initially to ensure the client had a watertight agreement in principle in order that he had enough confidence to move forward. Once the reservation was made we completed the French mortgage application in 8 weeks working on a tight schedule and negotiating a 0.15% discount to the rate.

Overall the rate we secured was 2.5% for a fixed rate interest only mortgage with an LTV of 75% across a term of 14 years.


August 2018 – French mortgage transaction of the month

French mortgage transaction of the month August 2018

August’s French mortgage transaction of the month is about a UK based entrepreneur looking to secure a large property loan but without placing a side investment, which normally the done thing at this level, or within private banking structures, in order to increase the viability of the loan.

We negotiated the best terms we could with a local bank and as the purchase price was in excess of €5m, we had to take into account the new rules relating to the ISI wealth tax, which meant only 60% of the loan would be deductible + 50% of the amount over €5m.

The property was a large detached ski chalet priced at €7.04m with a loan amount of €5.28m and an LTV of 75%. An interest only rate of 1.95% fixed over 20 years was secured.

The client was attracted by the low rate and the fact that he could be sure that that loan would amortise of the full 20 years allowable under the new rules. Using our experience and track record we were able to deliver the offer in good time. It pays to have experience and good contacts at this level as there are many pitfalls to navigate and one wrong move could lose the option and jeopardise the sale.


July 2018 – French Mortgage Transaction of the Month

As we come to the end of the ski season, this month we focus on the booming resort of St Martin de Belleville in the French Alps.

This British CEO came to us seeking a loan after having been refused several elsewhere. Despite an incredibly strong profile, French retail banks were not able to take into account 100% of the client’s income as they were over the age of 57. In addition, many private banks are unable to grant loans for construction projects due to the changing nature of the value of the asset under security and during the project they find it difficult to assign a proper value to the property.

We have access to and partnerships with private banks that will lend money for construction projects so for this apartment worth €3.2m we arranged for a 100% loan at a fixed rate over 20 years with just under €1m being transferred to the bank as additional collateral in a mixture of cash and other assets.

For further information on acquiring French mortgages, please get in touch.

 


June 2018 – French Mortgage Transaction of the Month

This month we’re back in the Three Valleys helping a client with a complex income solution.

Looking to buy a €2.25m property in Méribel, this leading Irish real estate developer had a financial set up that was too difficult to explain to French retail lenders. Despite our best efforts the French banks could not consider enough of the income to make the loan work for this purchase of an existing property in Méribel Les Allues and he did not wish to complete in cash due to the exchange rate at the time.

Instead we opted for a loan with a private bank where the client had to open an account with a minimum of €1.2m in assets with the bank. The client was attracted by the fact that he could use Sterling to fund the account and so would not have to exchange his pounds for euros at a disadvantageous rate. We obtained a fantastically low rate of interest at 1.38% with 100% LTV at a fixed rate of 5 years for this interest only facility.

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.


April 2018 – 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.


March 2018 – 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.