Buying in: Paris 8ème
Property price: €3,577,000
Loan amount: €2,861,600
Rate: 2.54% Fixed for the duration
Loan To Value: 80%
Term: 20 years
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 However it was a bit difficult because he had withdrawn less funds from his Self-Employed activity than he had the previous years.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%.
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€!
Summary of an interview with Nicolas Pettex, general manager of the Féau and Belles Demeures de France groups.
According to Nicolas Pettex, the Parisian luxury market is seeing new buyers coming from the United Kingdom. These buyers fall into two main camps. From British residents, usually residing in London, who are facing a move to Paris due to company relocation and from the French population living in London showing Brexit uncertainty. For those French residents living in London, concerns over the future value of sterling and preparing a possible return to Paris are the two main motivations for the current increase in interest in the acquisition of an apartment in Paris. This aims to both strengthen “the share of euros in their assets” and provide a foothold in the Parisien property market.
Where are they buying?
These London based buyers, according to Nicolas, behave in the same way as the French, attracted to neighbourhoods such as the Marais, the 9th or the 11th for example. Nicolas also explains that the 16th is “back” on the market. It is attracting younger buyers, or families sensitive to the quality of schools. We can, to a lesser extent, apply this phenomenon to eastern Paris in its entirety.
What are the prospects for 2019
What Nicholas has under offer or under contract is the same in terms of volume and amount as the record levels seen in 2018. A trend he expects to continue in 2019. He believes the fact that what can be found on offer in the Féau group is a good representation of “the state of health of the real estate market” given its size and market share. Nicolas reassured us that there is no “yellow-jacket effect”, and, he expects a record number of visits to their website at this time when Parisians return from the ski slopes to begin looking for property again.
Do “very wealthy” young people behave differently in terms of preferred area?
According to Nicolas Pettex, there has been an increase in extremely wealthy young people seeking to buy a property in Paris. Like the other high end property buyers, they are aware that buying in one of the most beautiful cities in the world is to purchase something extremely rare. Unlike other major cities which see large scale new build developments, central Paris remains in a frozen state due to strict building regulations. These investors are not very sensitive to the price of the apartments and behave in the same way as people buying a piece of art.
Buying in: Paris 11ème
Property price: 510,000 €
Loan Amount: 408,000 €
Rate: 1.80% Fixed for the duration
Term: 15 years
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.
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.