European Mortgages: Is Now The Perfect Time To Buy?

Autumn And Winter: Less Competition In Prime European Markets

Although the summer holiday season is well and truly over, and now may not seem like the most logical time to focus on a European property search, the colder months are actually an ideal time to search the market. During the summer, there is plenty of competition from other prospective buyers actively exploring the market. In autumn and winter, however, many people scale back their search for a property, planning to pick up a search again in spring with the aim of completing the transaction in time for summer. This makes autumn and winter an ideal time to search the market for a European property as there can be less competition from other buyers. 

Mortgages For International Property Purchases: What’s Possible

Prime property purchases in Europe are generally considered anything over €1 million. While still a significant sum, a €1 million mortgage is considered relatively small in the world of luxury European property purchases. This is because prime real estate in various parts of Europe can easily run to millions of euros, especially in the most popular and sought-after regions. For example, on the Cote d’Azur, in Paris’ best arrondissements, Monaco, in Switzerland’s mountain resorts and certain Balearic islands like Ibizia, €1 million doesn’t give you much buying power. Most properties will enter the market at around €2-5 million and, depending on where you are looking to buy, will easily set you back €10 million or more: properties of €20 or €30 million hit the market relatively regularly. However, financing options and mortgages are available for prime property purchases of any size through various products, facilities and lenders. 

European Mortgage Lenders

Some retail banks offer mortgages to non-nationals looking to purchase a European property for less than €1 million. However, these tend to be package products with relatively low loan-to-value ratios. The fact that they are packaged products means there is little room for negotiation or the possibility of accessing a tailored mortgage with rates and terms that suit your requirements better than a one-size-fits-all lending solution. 

Private banks come into their own for prime European property purchases for anything above €1.5 million. Assets Under Management (AUM) are generally a prerequisite for accessing a European private bank mortgage, although some lenders offer dry loans in exceptional circumstances. Every private bank mortgage for a prime European property purchase will be one of a kind - these lenders are not aiming to write mortgages at volume. We will seek offers directly with these banks to secure the best rates and terms for you. For their part (provided they have solid facts and documentation as a basis for negotiations), private banks can take a more holistic approach to mortgage lending. They will assess your overall net worth and financial position to offer you a mortgage tailored to your financing requirements. 

The advantages of using a private bank mortgage to finance a prime European property include:

• The ability to structure a mortgage via corporate entities held by the borrower
• The ability to offer a mortgage even in unusual financial situations retail lenders can’t consider. This will usually include the possibility of getting a mortgage if you are the beneficiary of a trust, if you plan to purchase the property via a trust or other entity, if you are a borrower with multi-currency income, have multiple income streams, you are a PEP and so on
• High-value mortgages to purchase trophy property, investment property, trophy homes and holiday home purchases
• 100% LTV is possible when assets are placed under management
• Entirely negotiable and tailored mortgages with the help of a broker - no inflexible packages or set rates and terms
• A variety of investment products for AUM to suit various risk appetites, with the aim that returns cover the mortgage payments
• The ability to accept borrowers of all nationalities (including Americans), provided the bank can meet its standard AML and regulatory requirements 
• A variety of mortgage products, including capital and interest mortgages or interest-only mortgages

It is worth noting that not all private banks publicise their mortgage offering or deal with borrowers directly. Instead, working with a broker who can make appropriate introductions and make a case for you will lay the ground for negotiations and arrange the most competitive offer for you is vital. 

How Do Mortgages Work in Europe

Private banks offer prime European mortgages on a case-by-case basis. Although not formal lending criteria, they often have preferences for the kind of borrower profile they will consider for this kind of finance: you have a good track record in business, entrepreneurship or a successful career, you are a high-net-worth individual with a significant asset base, you have relatively little debt and so on. 

There are also more formal criteria you will need to meet. Generally, you must have an annual income of at least €250,000 (or the equivalent in another currency). Banks may require that you want to make a property purchase of at least €2 million, and you have €1 million to put forward as AUM. You will also need a net worth of at least 1.5x (preferably double) the amount you are looking to borrow. In return, 100% loan-to-value and interest-only mortgages can be available if you meet the bank’s broader lending criteria. 

Other Financing Options

Those considering making a European property purchase think in absolute terms: can I get a mortgage or not? In some cases, a private bank mortgage may be out of reach because the loan amount isn’t high enough, you won’t want to place assets under management, or you don’t meet a bank’s criteria for another reason. Sometimes, you may not want a private bank mortgage for personal reasons. None of this is to say that financing a European property is out of reach or that a loan is unaffordable. Instead, it is often more about how practical a private bank mortgage is for you regarding the value of the property you are buying, your loan requirements and your overall financial position. 

In many cases, there will be other financing options available for you. For business owners and entrepreneurs, we can often arrange significant loans secured against your business assets, for example. Corporate finance covers a whole suite of financing options and, in many cases, will offer you facilities that allow you to access capital you can use to buy property abroad. Here, structuring the deal carefully is imperative as you will want to release equity from your company efficiently but not ‘muddle’ personal and business affairs.

Securities-backed lending is also an option for raising capital that you can use to finance a European property purchase. You can access a credit line without selling these valuable assets by using your liquid securities as collateral for a loan (these can include equities, bonds and investment funds). Securities-backed financing can be an ideal way of creating liquidity to buy a property. In many cases, it will give you access to the capital you need if you don’t meet the minimum loan amounts for a private bank mortgage or don’t want to place AUM. In some cases, securities-backed lending can create the liquid capital reserves needed to put the required AUM with the bank to access a high-value European mortgage.