Savanna Baile

Private banks will generally require a new client to place a minimum of €1,000,000 in assets under management with them in order to qualify for a mortgage. The exact amount is decided on a case by case basis as the bank will take into account the loan size, the client profile and the property. Private banks like to work with clients they can see a long term relationship with.

Terms given by private banks are highly bespoke and are influenced by the clients profile, the property location and the amount of assets under management (AUM). Rates are generally given as EURIBOR + a margin and maximum loan-to-value against the property is usually capped at 70%, however, with an AUM structure there is the ability to cross collateralise the property and the investments to get a much higher LTV – even up to 100%. Private banks will also offer products not available through retail banking in some cases such as interest only mortgages and equity release of a property.

There are many benefits to have AUM with a private bank alongside a mortgage. The most common reasons this structure is chosen is: It allows clients to avoid needing to liquidate their investment portfolio to purchase a property. The return earnt on the AUM assists in offsetting the mortgage interest and can even be higher than the appreciation of the property which works for clients who like to diversify their asset classes, and private banking mortgages are much more flexible and bespoke than a standard retail bank.

Even if you have the cash available, getting a mortgage can sometimes be more beneficial in the long run. Releasing equity after purchase is very difficult in some countries, especially for non-residents, it is much easier to leverage the property when purchasing to avoid trapped capital down the line. Another reason is to help mitigate property ownership taxes, across Europe, there a few countries that charge property or wealth taxes based on the equity in properties so clients use debt as a tool to help mitigate this.