Buying in: Megève, Alps
Property price: €1,470,000
Mortgage amount: €940,800
Mortgage type: Fixed Interest Only
Mortgage term: 12 years
Interest rate: 2.65% fixed
This client, working in the heart of the City, dreamt of purchasing a property in the Alps. He has been looking for a while and finally found a refurbished four-bedroom apartment in Megève.
He wanted an interest-only loan as this would allow him to keep the repayment costs down. He planned to make the payment at the end of the 12-year period using his workplace share incentive scheme and his 25% tax-free pension lump sum which he will receive when he turns 55.
At the same time, the client wanted to refinance his current main residence deal with a bank in the UK. He also had an interest-only mortgage on this property by taking a further advance on a very advantageous fixed deal which was increasing his debt ratio drastically.
We studied his information and concluded that the client has a very good profile for the purchase as he would meet the 40% debt-ratio criteria and had a good mix of net assets which consisted of investments and goods, such as art and wine. This is essential to cover an interest-only loan. It is important to present the information like this right from the start so that the underwriters look at the file from the right angle.
The usual threshold for waiving the insurance on interest-only terms is 60% and there are usually further conditions which need to be met. The LTV at the time was 68%. We managed to get both parties to meet half-way and reduce his LTV to 64% and waiver the life insurance.
Finally, the client wanted to purchase the property through an SPV, so we introduced him to a notaire who can set up a SARL.