Posts in category: Transactions

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.

September 2015 – French Mortgage Transaction of the Month

September’s transaction of the month is on a new-build ski apartment in Chatel, with the buyer taking a loan of €450,000 (almost on the nose of our average loan amount so far this year).

The rate taken was the market leading fixed rate for a 20-year duration loan – 2.70%. The loan to value ratio was around 80%. The apartment enjoys a very good location in this increasingly popular resort and as such the buyer intends to rent it out for as much of the year as possible.

Of course, it’s worth repeating here that whilst the property will certainly generate an income which will be put towards the mortgage payments, technically French banks to not offer buy-to-let mortgages as you would find in the UK for example. Rental income is not taken into account for affordability, instead it is just your normal criteria over assets, earnings, etc that are taken into account.

By letting the property out and agreeing to provide a handful of basic rental services such as linen changing, key holding and breakfast provision, there is a chance that the client will be able to recoup the 20% VAT as the property is contributing to the tourism industry of that resort. Such a rebate would represent a considerable saving, although the VAT rebate is pro-rata over 20 years, which means should the client stop renting the property out after 5 years, then 15% would need to be paid back.

August 2015 – French Mortgage Transaction of the Month

This month’s transaction of the month is on a large villa in the South of France. With a loan value of €3m and a property price of €5m, the client put down a reasonably sized deposit at 40%.

On the sum of €3m we managed to source the client a 10-year repayment loan at a rate of 2.85%, a good level for such a large loan on a shorter than normal repayment period.

The client bought the property using and SCI (Société Civile Immobilière). An SCI is essentially a private, limited and fully incorporated company with a registered office in France. This ‘office’ can be the property itself and then shares of the SCI then own the property in question.

There are many advantages of owning a French property through an SCI, including taxation benefits. Yet perhaps one of the most commonly appreciated advantages is that, being a company, the shares of the SCI are owned by its shareholders, in many cases, family members. This means that throughout the course of a buyer’s life they can bequeath shares to members of the family in a tax-efficient manner.

For further information on buying French property through an SCI or French mortgage in general, please get in touch with us.

July 2015 – French Mortgage Transaction of the Month

Foreign expats living in the UK are also making the most of low French mortgage rates and have become a new buying force in the market as they too coin in on the strong pound.

This month’s French mortgage transaction of the month was processed for a Russian client, living and working in the UK, who wanted to exploit the weak euro and low French mortgage rates to buy an apartment in the South of France.

He chose Cannes as it stacked up in terms of rentability, with its countless shows, exhibitions and events happening all year round. We secured a loan of €250,000 on a €350,000 property at 2.55% fixed for 20 years.

June 2015 – French Mortgage Transaction of the Month

French rates have risen over the past month, but incredible long term value can still be locked, as we show in this month’s French Mortgage Transaction of the Month.

We secured a 2.70% fixed repayment loan over 20 years for a British buyer working in both Paris and London. The €300,000 loan was on a property of around €375,000 for a for a one bedroom new-build apartment in Paris.

As the property is off-plan the buyer only has to pay 2.5-3% Notary fees, instead of the 7-8% payable on resale property, therefore the saving here is considerable and was definitely worth it to this client who was happy to wait for the eventual completion date (Q4 2016).

All clients taking on a mortgage in France must be able to show ‘rainy day funds’, which are simply a level of savings to show you could continue to make repayments should anything go wrong; job loss, etc.

April 2015 – French Mortgage Transaction of the Month

Fixed 20-year mortgages become the most popular product as non-resdient buyers continue to get the most out of the market

Over the past four weeks the majority of our applications have been for classic freehold property (not leaseback) with buyers opting for long term fixed rates of 2.55% over 20 years, usually on 80% loan to value.

Therefore its no surprise that this month’s French mortgage transaction of the month also falls into this category. The couple in question bought a ski property in Chalet at €500,000, providing 20% upfront with the remaining 80% on loan at 2.55% across 20 years.

The couple had the means to shorten the term, although with some family planning circumstances potentially coming into play over the next 10 years they opted to keep the term at 20 years at the low rate and therefore minimise they monthly outlay.