Enness Recently Assisted A Client With Complex European Property Financing Needs

• Client: International HNW individual
• Property: European secondary home under construction
• Product: Seven-year interest-only mortgage
• AUM: Minimum €1.7 million
• Initial Rate: 1.35% + 3-month EURIBOR
• Structure: Monaco company structure for the property and AUM

Enness was approached by a high-net-worth client looking to finance the purchase of a secondary home in Europe. The property was still under construction at the time of purchase, creating a requirement for a lender that could support the client through both stages of the transaction: while the property was being completed and once construction had finished.

The client wanted to avoid liquidating their existing investments to fund the purchase and was also looking to develop a broader private banking relationship. As part of the arrangement, they intended to transfer a portion of their private wealth to the new bank and build an investment portfolio with the lender.

The transaction therefore involved more than simply finding a mortgage. Enness needed to identify a lender that could finance the European property throughout its construction and subsequent completed stage, provide a suitable asset-under-management (AUM) solution, and offer a strong banking relationship. The client also required assistance identifying appropriate professional advisers for international tax, legal matters and the establishment of a suitable company structure.

Enness identified a lender able to provide a seven-year interest-only mortgage, giving the client a longer financing period than the five-year interest-only terms commonly available. The initial rate was structured at 1.35% above three-month EURIBOR, with the pricing linked to the amount of AUM retained with the bank.

The minimum AUM requirement was €1.7 million. Rather than structuring the pricing so that a reduction in AUM would immediately result in a significant increase in the interest rate, Enness negotiated a stepped margin structure. This gave the client greater flexibility if their AUM position changed over the course of the relationship.

The client initially opted for a variable rate, while retaining the flexibility to fix the rate during the mortgage term if this became more suitable. The seven-year term also provided additional flexibility around the longer-term ownership of the property and the client’s private banking relationship.

As the banking relationship and AUM arrangement were important elements of the transaction, Enness also helped the client establish a relationship with a suitable bank. The client wanted to build their relationship with the institution over time and potentially increase the level of AUM held with it.

The ownership structure required additional consideration. The client did not intend to purchase the property in their personal name and required advice on the tax, estate planning and legal implications of establishing a company structure. While Enness does not provide tax or legal advice, we introduced the client to a specialist partner experienced in international taxation and estate planning across the jurisdictions involved.

Following discussions between the client and the professional advisers, a double SCI Monaco structure was selected to hold the relevant assets and AUM. As structures of this nature can require additional explanation when presented to lenders unfamiliar with them, Enness helped facilitate communication between the client, advisers and lender throughout the transaction.

This case demonstrates how international property finance can involve considerably more than securing a mortgage. By considering the client’s property purchase, AUM requirements, preferred banking relationship and ownership structure together, Enness was able to help create a financing solution aligned with the client’s wider objectives.

If you are considering purchasing an international holiday home or secondary residence and require a financing structure that takes your wider wealth and banking requirements into account, speak to a mortgage specialist.

Risk Warning:
Mortgages are secured against property and the property may be repossessed if repayments are not maintained. Interest-only borrowing does not reduce the capital balance during the interest-only period, so a suitable repayment strategy is required. Variable-rate borrowing can also result in higher monthly payments if the underlying reference rate increases. Property purchases involving multiple jurisdictions and company structures may carry additional legal, tax and regulatory considerations.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Enness does not provide tax or estate-planning advice and clients should seek independent professional advice before establishing a company or ownership structure. Finance is subject to status, underwriting, property assessment and lender criteria. Terms, rates and availability will vary depending on individual circumstances and the proposed transaction.