Private Bank Lending Structures for French Mortgages

Private bank lending structures for French mortgages are particularly relevant for non-resident investors and expatriates, especially when dealing with high-value property financing in France. Here’s a breakdown of how these structures work and their benefits.

Private Bank Lending in Prime French Property Markets

  • Target Market: Private banks focus on prime and super-prime French property markets, due to stable prices and steady demand. This focus includes areas like prime Parisian arrondissements, popular Alpine ski resorts and the French Riviera​​.
  • Asset Placement: To access private bank mortgages, especially for high-value properties, borrowers typically need to place assets under management (AuM) with the lender. The amount of AuM required usually starts at a minimum of €1 million​​.

Benefits of Private Bank Mortgages

  • High Loan-to-Value (LTV) Mortgages: Placing AuM with a lender usually allows for 100% LTV mortgages. This means borrowers can finance the entire value of the property, which is a common practice for prime European property finance​​.
  • Wealth Tax benefits. High LTV mortgage loans minimize exposure to French wealth tax as this ensures that the value of equity held in French real estate assets is kept to a minimun
  • Interest-Only Options: Private banks often offer interest-only mortgages. These allow borrowers to pay only the interest on the mortgage for a certain period, reducing monthly payments​​.
  • Investment Returns on AuM: Although placing AuM with a lender is not the same as paying a deposit, these assets are managed and can generate returns over the lifetime of the mortgage. Some banks offer guaranteed returns on these investments, adding a financial benefit to the borrower​​.

Key Considerations

  • Geographic Limitations: High-value private bank mortgages are more readily available in super-prime regions of France. In less sought-after regions, additional AuM might be needed to secure a mortgage​​.
  • Investment Strategies and Management: Private banks offer various investment strategies for the AuM. Borrowers can choose from fixed portfolios or bespoke arrangements, depending on their net worth and the size of the mortgage. There are options for conservative investments with guaranteed returns​​.

Private bank mortgages in France offer several advantages, particularly for high-value property purchases in prime locations. The requirement to place assets under management can be beneficial, allowing for 100% financing and potential investment returns. However, these lending structures are more suited to borrowers with significant assets and those purchasing in super-prime areas of France. As the lending criteria and benefits can vary significantly between lenders, potential borrowers should carefully consider their options and seek expert financial advice.