Loan secured on French Riviera villa for expat with extensive property portfolio

THE SCENARIO

Following his latest trip to Monaco, Managing Director of Enness International, Hugh Wade-Jones, put me in contact with a UK national residing in Monaco whom he had met there. Traditionally a farmer by trade, the 56-year-old client moved to Monaco in 2012 and branched out into property investment, where he now generates all his income. On Hugh’s recommendation, the client contacted Enness looking to purchase a villa in a town located near St Tropez, as a secondary residence for his wife and two children. He was looking to borrow the maximum loan amount available to him on a capital repayment basis.

Whilst the property was old, it was in immaculate condition and located in the stunning town of Grasse, the perfume capital of the world, and had a purchase price of €730,000. However, despite the spectacular backdrop of the French Rivera, this case was not without barriers.

Moving away from the farming industry, the client now generates all his income through financial investment (investing in financial instruments such as stocks and bonds), thereby initially thinning the pool of enthusiastic lenders. Due to the schematic and box ticking nature of the compliance and credit processes of the retail banks, my client and I did not enjoy any success with the retail banks we approached. One such retail bank refused to finance this case due to the nature of my client’s income, as well as the fact they considered him self-employed. This particular lender did not finance self-employed residents of Monaco, and so did not go in our favour.

There were additional hurdles to overcome when another French lender refused my client, as some of his investments are not on a fixed yield. If your investment is not in a fixed yield, then this lender works under the assumption that the portfolio will generate 2.5% a year. This meant my client failed their affordability calculation, even though his investments have performed significantly better than this over recent years.

Despite this relatively low loan amount, I knew only a private bank would take a view on his slightly unorthodox income. Though his investment income of around $200,000 per year may not quite be enough to support the loan repayments for the retail banks, the client had considerable assets in the background. For the private banks, this mitigates his relatively weak income in a way retail banks would not accept.

Based on my client’s background and his needs, we approached a private bank in Nice, meaning they knew the area of the property very well. Not only could this bank take a more holistic approach to my client’s investment income, they could also offer my client an extremely competitive rate which would not be available to him with the retail banks. I negotiated a very competitive 1.9% fixed rate over 20 years on a capital repayment basis for my very happy client.

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