French Private Banking
We have a wide set of relationships with international private banks based mainly in London, Paris, Luxembourg and Monaco.
If you are considering a new French private banking relationship we can easily match you with the right private bank to suit your needs.
Many people set up a new private banking relationship in the course of the purchase of a high value property. The reasons for this can be manifold but generally private banks can help when the client…
- has a situation is too complex for French retail banks
- does not want to engage in the lengthy documentation process for getting a French retail loan
- has more assets than income
- has an existing portfolio of cash assets without any loans against them.
The benefits of working with private bank are that you have a relationship with a single private banker who will be the liaison point of contact for any issues relating to your account and the interest rate on private banking loans are generally lower than those found with French banks.
The essentials of a private banking relationship are that the client brings a significant amount of cash assets to the bank such a cash, bond or equities portfolio. The private banker will then agree a strategy to manage this portfolio to generate a return to match your appetite for risk.
Once this wider relationship is established with the bank lending on property can be discussed. Broadly speaking there are three main types of lending by private banks for French property.
|Low Risk||Medium Risk 1||Medium Risk 2|
|Interest Rate Margin||less than 1% margin||2%+ margin||2%+ margin|
|Amount of assets places with bank||130% of the loan amount||50% of the loan amount||30% of the loan amount|
|Amount lent against the property||0%||100%||65%|
The low risk strategy is often adopted by investors who want to have their cake and eat it too. The can enjoy returns of the whole of their cash portfolio as well as the full returns on the property whilst keeping their interest rate as low as possible.
The medium risk options are where the bank takes a little higher risk and the interest rate rises as a result. In both of the above cases the overall LTV is approximately 50% net. Rates are negotiable but will always depend on the amount of assets brought to the bank and the risk profile overall. This element of risk also takes in the location of the property with many private banks uninterested in lending outside prime areas.
Existing property portfolios refinancing
In this era of increasingly conservative banking , Private banks can be a good option for those with large buy to let portfolios. A minimum amount of assets will still have to be transferred to the bank but this can be a good way of consolidating a portfolio with loans for which it has been hard to obtain a loan for.
The above loans may also be used to release equity from any existing prime property asset in Europe. The exact same conditions apply, though usually the medium risk products will be preferred as there is more of an opportunity to release cash through the transaction.
Such structures are tax efficient for reducing liabilities for French tax. The interest on the loan is deductible in France against any income tax on rental income. The loan value is also deductible from you net asset position in France. Wealth tax in France is levied on assets over €1.3M, so by taking a loan against the property you can avoid this liability which is calculated at the following rates.
|Net Assets (€m)||French Wealth Tax Rate|
|0 - 0.80||0%|
|0.80 - 1.30||0.5%|
|1.30 - 2.57||0.7%|
|2.57 - 5.00||1.0|
|5.00 - 10.0||1.25%|
|10.0 and above||1.5%|