Over the years we have dealt for many different nationalities living in countries all around the world. We often find that the mix of nationality and country in which they are living can bring about an array of specific challenges. One such challenge we have encountered on numerous occasions is that of American residents living in Europe and seeking finance from European lenders. Thankfully our experience and contacts in the lending markets allow us to bring an array of different parties together to arrange bespoke finance deals.
On the face of it, the following scenario seems extremely straightforward. However, there are obvious risks associated with raising finance for home improvements/business opportunities.
Property value: €6.4 million
Refinancing required: €4 million
Reasons for refinancing: Home improvement/business opportunity
It is worth noting at this point that the property, valued at €6.4 million, was mortgage free and would obviously be the central security for this fundraising project. So, where do we start?
While we deal for clients who have relatively straightforward finances, over the years we have attracted an array of challenging scenarios. Many of parties who approach us have been turned down by other mortgage brokers – highlighting the value of our independent status. To put this scenario in perspective, we needed to address the following issues:-
Residency status: American resident (living in France)
Location of property: South of France
Funds required: €4 million
LTV ratio: 75% (including AUM pledge)
As we touched on above, one of the main difficulties with this particular transaction was the lack of appetite amongst European lenders to satisfy American residents. While in theory this significantly reduced the pool of potential lenders it was fairly obvious that the private banking sector was the way forward. We know from past experience that private banks are more flexible when it comes to different nationalities, property assets located around the globe and reasons for refinancing.
Even though this particular scenario may seem to be “vanilla”, as we have mentioned, above it was far from that. After negotiating with various contacts in the private banking sector we managed to arrange an extremely competitive bespoke refinancing package. The details were as follows:-
Mortgage: €4 million
Mortgage type: Interest only
Assets under management: €1 million transferred to lender
LTV rate: 75% (including AUM pledge)
Fixed rate: 1.5% plus Euribor (floored at 0%)
Before we go into more detail regarding this bespoke package, it is worth noting the reference to the Euribor rate which is floored at 0%. This ensures that the minimum return for the lender would be 1.5% as at the time of writing the Euribor rate is negative – reflecting the current economic challenges in Europe.
We know from experience that private banks are very keen to explore long-term relationships with new clients requiring mortgage/refinancing arrangements. As a consequence, the transfer of €1 million, with a six-month indicative return of 2.4%, was a win-win for both parties. The indicative return on funds under management was significantly greater than the provisional mortgage variable interest rate. It is also worth noting that these funds must be held with the lender for the duration of the loan.
While the nationality of the lender and the location of the property were challenging, there were also risks associated with raising finance for home improvements/business opportunities. The 75% LTV is extremely competitive for this type of scenario as is the interest rate of 1.5% over Euribor.
Our status as an independent mortgage broker is extremely important when negotiating bespoke arrangements for complicated financial scenarios. In this particular situation, it was fairly obvious from the outset that the private bank/niche lending sector would offer the most competitive terms. The return on assets under management is extremely attractive compared to the variable mortgage interest rate. As a consequence, the client was able to raise the €4 million required and the lender able to bring assets under management into the mix. The degree of security between the property and assets under management was reflected in the lending rate.
If you have what may seem a fairly complex financial situation, and are looking to raise funds, please feel free to contact us for a no-obligation chat. We would welcome the opportunity to discuss your scenario in more detail, your requirements and discuss the various options open to you.