Getting a mortgage in France can feel like a challenge, especially if you’re a non-resident unfamiliar with the process. Furthermore, many non-residents may face unexpected hurdles when trying to get mortgages with French high-street banks as many they simply do not offer this product to international buyers at all.
Though there are private banks that do lend in France, they are often based elsewhere in Europe, making them harder to find. Additionally, many do not advertise their mortgage services, as they reserve them exclusively for existing clients.
If you are looking to finance a property in France, knowing where to turn is key. Understanding the lending landscape can save you time, effort, and avoid any unnecessary roadblocks along the way.
Private Bank Mortgages
Private Banks, at their core, are looking to manage a client’s wealth and develop a relationship beyond mortgage lending. They will always establish a relationship with a client through Assets under Management (AUM). A mortgage is then a benefit you receive as a client of theirs.
The minimum amount of AUM to be placed typically ranges between 25-50% of the total loan amount, with a minimum of €1 million. This is, however, dependent on the specific product and circumstances. AUM could be cash that the bank invests on your behalf or your existing portfolio of stocks, shares or bonds that are simply transferred for the bank to manage.
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The interest rates of private bank mortgages are typically structured as Euribor + margin. Euribor has been declining consistently and is predicted to keep doing so, which can be very appealing. Currently, the margins are sitting between 1.3 - 2.3%.
The margin is dependent on:
- Property Location and Value: Prime locations offer more attractive margins, and higher-value properties can attract lower margins
- Nationality: Outside of the UK/EU can require more paperwork, so this may be reflected in the pricing
- Net Wealth: Those with higher net wealth spread over multiple asset classes will be seen as less risky, so may be more favourable
- AUM Pledged: More AUM deposited with the bank will often result in a lower margin
- Relationship with the bank: Enness Global has many longstanding relationships with private banks across Europe, allowing us to get the best deal available
Loan-to-Value (LTV) for a second home is usually a maximum of 75%, whilst a main residence can reach up to 90% LTV or even up to 100% LTV, with more AUM and a specific structure agreed with the bank.
A traditional structure of a private bank mortgage is:
- Purchase Price: Minimum €2,000,000
- Loan Amount: Minimum €1,000,000
- Assets Under Management: Minimum €1,000,000
An example of this would be:
- Purchase Price: €5,000,00
- Deposit: €1,250,000
- Loan Amount: €3,750,000 / 75% LTV
- Assets Under Management: €1,500,000
It is important to note that with Private Bank mortgages, each product is tailored specifically to the borrower.
Who are Private Bank Mortgages designed for?
Private Bank Mortgages are best for High Net Worth (HNW) individuals looking for a broader and more flexible approach to their mortgages. These products are more than just mortgages –clients receive personalised financial advice and investment strategies, with many private banks also offering interest-only mortgages, allowing clients to maintain liquidity and continue investing.
There are many reasons people prefer working with a private bank, including:
- Clients who use debt strategically to retain liquidity and grow wealth
- Clients with multiple or complicated income structures
- People who retain earnings in their company and pay themselves a tailored salary
- HNW individuals with a variable income, for example, property developers who earn millions in one year and nothing in the next
- Borrowers using debt as a tool, for example, a 100% LTV mortgage which can help mitigate French property tax
- People investing in one equity, waiting for a large liquidity event
Private banks are specifically geared to cater to HNW clients; they are more understanding of complex situations and can offer a much greater service to more complex clients than French High Street banks, who tend to be much more conservative and risk averse.
Private Bank Case Study: 100% LTV
Our client came to us looking for a 100% LTV mortgage against their new property purchase in the South of France. They planned to use this as an investment property, and required an interest-only solution with the highest possible LTV, to help mitigate French IFI tax and keep monthly overheads as low as possible.
This client has a large portfolio of stock and shares across multiple brokerage accounts that are currently self-managed.
We placed them with a lender who offered to manage the entire portfolio for them and lend 100% of the property value against the home. This was crucial as the loan needed to be collateralised against the property to mitigate the IFI tax, rather than structured as a Lombard Loan secured directly against their securities portfolio.
- Property Purchase Price: Circa €2.5m
- Loan Amount: Circa €2.5m
- Portfolio moved to bank: over €3m
- Rate: Euribor (not floored) rate
- Interest only – rolling term
Dry Lending
‘Dry Lending’ is a mortgage that does not require Assets Under Management to be placed with the bank in order to establish a relationship. It is most typical of retail or ‘High Street’ banks. Dry lending rates are generally fixed instead of Euribor + margin, and currently, rates are between 3.7-4.4% fixed; factors that impact rates are:
- Nationality & Country of Residence: Retail banks in France are a lot more selective about which nationalities and residencies they will take on – for example, many will not look at US clients who are self-employed or any clients who live outside the EU
- Income Structure: Retail banks are not geared, nor do they have the appetite for complicated income structures
- Length of Term: Longer fixed periods over 10 years can cause rates to become higher
- Where the property is located: The bank wants surety that should the loan default, they could sell the property easily to recoup their losses, so properties in highly liquid markets may be priced better
- Structure: Generally, rates are lower when purchasing in a personal name rather than through a French SCI or company
Retail banks will provide a length of term between roughly 15-25 years with a maximum lending age of 75. The loan-to-value can be up to a maximum of 80%, and almost all loans will be amortised with both capital and interest payments made monthly - interest only is uncommon and hard to find in French retail banks.
These lenders will require a lot more ‘paper’ evidence from clients and have a much lower appetite for risk/more complicated clients than a private bank would. The debt-to-income ratio (DTI) is important; with high street banks, it is capped at a maximum of 35% and is something they will look at very carefully.
Who are Retail Bank Mortgages designed for?
Retail banking mortgages are best for clients who would be considered uncomplicated – clients with minimum income streams, good credit, and a low DTI ratio. Clients will need to be able to gather a lot of documents and evidence of their wealth and income.
If you are a non-resident purchasing or refinancing your property in France, it is advisable to use a broker.
Bridging Loans
Bridging loans are a short-term solution that can act as a ‘stop-gap’ between delays in liquidity or when a loan is only required for a year or two. The maximum loan to value for a bridging loan in France is 60-65% depending on the property and location. The lenders we work with have a minimum loan amount of €1 million; these lenders tend to favour prime single-unit residential properties above other property types, such as a block of flats or a hotel.
Borrowers should be aware that the property must be held in the correct structure, and almost every lender will require the property to be held in or moved to a French SAS structure. French Banking Monopoly Laws prohibit many lenders from being able to lend to a personal name or directly to a French SCI. We work closely with our clients, the lender, and the relevant tax and legal advisor to come to a solution that will work best for the client.
Currently, bridging rates in France sit around 1-1.2% per month, and interest will usually be retained in the loan.
A big difference between a traditional mortgage and a bridging loan is turnaround time; rather than a mortgage, which may take 3-6 months to drawdown, we can arrange the drawdown of funds in as little as 2 weeks, provided documentation and structure are ready to go.
Who is a Bridging Loan for?
The most common scenario we see with bridging loans in France is HNW individuals selling one holiday home to purchase another and require the funds before the sale of the original property. In this case, they would just have the loan for as long as the property remained on the market, likely with no early repayment charges after the first three months, and then the loan exit is the sale of the property.
We have also assisted property developers who, upon completing a project, need to refinance away from their development loan whilst they wait for the sale – they can use a bridging loan in the interim.
Why Enness
Using an experienced broker not only expands your options when choosing a mortgage in France, it also ensures you have a broad overview of the market and are making an informed decision. This is important if purchasing in a country where you are not a resident, do not speak the language, or are less aware of the mortgage process internationally.
Enness Global has a great relationship with both retail and private banks across Europe. We help clients get in the door with the banks, search the market for the best terms, recommend banks that suit your needs, and negotiate on your behalf.
If you or one of your clients is purchasing or refinancing a property in France, please contact us.
