Lending Query
Residential Mortgage – Mougins, France. We were approached by French national who was looking for refinance of his residential mortgage. His current lender required a large percentage of the loan (60%) backed by a bond portfolio – pledged to the bank’s balance sheet. The client wished to release equity by refinancing the facility with another bank with a less onerous requirement for assets on deposit. The loan size was 3 million EUR versus a property valuation of 5 million EUR. The client had 1.8 million EUR pledged with the bank as Assets Under Management.
Client Circumstances
The borrower in question was a successful real estate developer in the South of France and therefore had an inconsistent income stream. He had significant cash savings which was a tremendous help given the obvious affordability issues. The client was a UK Passport holder, but resident in France. We had to approach a local French bank with an appetite to support property investors. It was important to the client that the bank show interest in supporting him financially in order to expand his property portfolio.
Problems to Solve
The main issue was to find a local bank who would be happy holding a smaller sum of Assets Under Management (AUM) on day one (25%). As it is very tough to perform equity release on this property in France – the next best option would be to refinance the current loan on a like for like basis with a new lender which would be satisfied with 25% of the loan amount pledged as AUM.
Solution Provided
We were able to negotiate terms with a Cote d’Azur regional bank refinance + 25% AUM pledge on Day 1 – allowing the client to net out c1 million EUR for use in other real estate activities.
3 million EUR mortgage
60% Loan to Value
Fixed Rate 2.00% + 3m Euribor
Term 10 years
Interest Only
750,000 EUR pledged as AUM on Day 1 (25% of the loan amount)