HomeFrench Mortgages for Property in The French Alps
French Mortgages for Property in The French Alps
The French Alps have an incredibly wide range of property prices and for value for money, property there still appears a better option than Switzerland. From €50,000 studios to impressive chalets in the most exclusive resorts that will set one back in excess of €50,000,000, there is a wealth of options for all types of buyers. As a result, the range of French mortgages for property in The French Alps available to international property buyers in the region is equally large and an example of what is on offer can be viewed in our French mortgage best buy table for property in the Alps below.
The French Alps offer world class ski areas and are attracting increasing numbers of visitors during the summer as well. The close proximity to Geneva and Lyon airports, the major financial and urban centres of Western Europe ensures that interest in the Alps remains strong.
Throughout the credit crunch, demand for second or investment homes in the Alps has remained substantial ensuring stability in property prices during tough economic circumstances.
Over the last few years, with an ever increasing demand from international and French buyers and a limited amount of properties available (only so much can be built in highly regulated ski resorts/villages), prices have carried on rising in a number of key locations.
The consequences of Brexit are difficult to assess at such an early stage but notaires, agents and developers are confident, as the alpine market is truly international, a chalet in the Alps is a desirable purchase and one less country in the EU is unlikely to affect that.
The French Alps also attract significant interest from developers and constructors and therefore new build and ‘leaseback’ property (and the financing options for them) are particularly prevalent.
If you are thinking of buying an off-plan (or VEFA, in France) property, check out our video guide.
Here we look at the key points to consider when raising money to purchase a property in the French Alps.
What are the French finance options in the Alps?
As mentioned earlier the consistent interest in property in the French Alps has led to stable and/or increasing property prices and demand in recent years. As a result French mortgage providers are specifically keen to lend against property in the region and valuations are often very satisfactory.
The most competitive terms with respect to LTV (loan to value) and the interest rate payable are offered via the French Retail Banks – although each of them features very different criteria. Some French retails banks work with non-resident borrowers, across the whole of France, via a centralised department dedicated to international clients. Other French mortgage lenders work on a more branch based approach where expertise and knowledge regarding non-French buyers is down to the individuals working within that branch.
In the past some Retail Banks in Switzerland have also offered mortgages to purchase property in Alpine resorts near to the Swiss border. While the interest rates have historically looked attractive, borrowers need to be aware that they will be borrowing in Swiss Francs (CHF) to purchase a property that is valued in Euros (€) creating a substantial foreign exchange liability. This issue was highlighted perfectly when the Swiss National Bank abandoned its long standing peg against the Euro in January 2015 – causing the Swiss Franc to surge in value by 30%! Borrowing through Swiss retail banks to purchase a property in France will be at lower LTVs (loan to values) than available through the French retail banks.
The third option is to obtain finance via a Private Bank – although the entry level in terms of purchase price for this option is currently around €2 million. As is the case with the retail lenders following the credit crunch a number of large, International banking groups have withdrawn from cross border transactions taking security over a property in another jurisdiction.
However as with other prime markets around the world such as London, New York, Paris, the Cote d’Azur, Private Banks are keen to provide finance for the right clients purchasing in top Alpine locations and to attract new clients who are in a position to provide them with assets to invest (AUM or ‘assets under management’).
Private Banks who lend against property in France are currently looking for clients to invest a minimum of €1,000,000 – €1,250,000 with the potential for this to grow meaningfully in the short to medium term. A number of Private Banks however have a minimum assets requirement for new account openings of € 2 – 3 million.
The benefits in developing a wider relationship with a Private Bank is that the interest rates on the finance they provide will be much more competitive than those available via retail banks. Typically the borrowing will also be available on an interest only basis and without life insurance, providing further savings. Furthermore Private Banks are able to lend to a wider range of corporate structures, unlike Retail Banks.
You also need to be aware that not all Private Banks will finance property in the Alps and those that do are selective about which resorts a property can be located in. Furthermore they are generally very cautious providing finance against a property that is under construction of in the process of being renovated.
Important points to consider:
Here are a number of factors to consider if you are thinking of using a French mortgage or finance facility to purchase a property in the Alps.
If you are purchasing a new build property in the French Alps, or a property that is in the process of being constructed the French lenders will require the developer to provide a GFA (Garantie Financière d’Achevement). A GFA is an insurance policy/guarantee that ensures the construction will be completed or your deposit will be refunded, should the developer or constructor finds themselves in financial difficulty and are unable to complete the work themselves.
French lenders are becoming increasingly selective about which new build and leaseback developments they will finance. It is worth checking, before you buy to ensure that finance is available for the development you are considering.
If you are planning to build your own Chalet, remember when planning your timescales that many aspects of the construction cannot be completed during the winter season.
For individual Chalets, lenders prefer to finance a project with a “Contrat de Construction de Maison Individuelle” as opposed to a “Marché de Travaux” contract.
There can be financial planning benefits to having a French mortgage secured against your property. A professional tax consultant will be able to outline the benefits with respect to wealth tax and offsetting rental income against mortgage interest.
Check that the property you are buying is insurable and not located in a zone that is at high risk from avalanches or rock falls.