Mortgage Advice for France and Switzerland
Exploring mortgage options before committing to any property purchase is vital as there are significant differences between countries.
By Miranda John, Director, at mortgage broker SPF Private Clients.
It may be tempting to raise funds in the UK as it is a relatively simple process. But the advantage of a local mortgage is that the debt will be clearly registered against the property, which may have benefits for any tax liability. Certainly this will be the case when it comes to offsetting French Wealth Tax. In addition, the exchange rate is an important consideration and matching the currency of the property (your asset) and the debt (your liability) can offer some protection against exchange rate moves and works effectively if you intend to rent out your property.
Approaching a local bank directly can be hit and miss as service levels vary wildly and there are more challenging lending policies for non-residents. In France, it is generally only advisable to do so if you are confident in French and happy to conduct a face-to-face meeting. Swiss Cantonal banks always insist on face-to-face meetings so an application cannot usually be made remotely.
Brokers have a significant role in this specialist world as they should have access to a far wider panel of lenders than a private individual would find. They should also know which lenders can make a decision within a given timeframe. As they will know the idiosyncrasies of each lender’s underwriting, this should help smooth out the application process. Most brokers charge a fee it can be worth paying to have someone experienced on hand throughout the process. Brokers can also access exclusive rates, bespoke products such as fixed rates with reduced early repayment charges, and dedicated underwriters to process the application more efficiently. A broker should have language skills and a degree of diplomacy that can be invaluable.
The Alpine mortgage market is well established. For more expensive property (€2m+) there is a good number of private banks happy to lend. While a local bank will offer a standalone mortgage, a private bank wants a relationship and assets under management. Private banks come into their own if you do not fit the rigid mould of retail lending, especially where income is not consistent or offshore. Private banks look at the bigger picture; for example, they would recognise the potential of a successful business from which income was not taken, as well as offering more flexibility on age. For property in France with a value of €1.3m+, taking out debt makes sense to offset the Wealth Tax that would otherwise be payable. Mortgages must be secured on the property itself to offset this tax and lending is only available through French or private banks in Monaco, Luxembourg and Switzerland.
So what of Brexit and its impact on British buyers? Most European banks still offer historically low rates so long-term fixed options are ideal in these uncertain times with the rate locked in for 10 to 15 years in Switzerland and even longer, up to 20 to 25 years in France.
There are early repayment penalties but most are usually six months’ interest, which may be a modest sum with current rates in play.
Contact Miranda on +44 (0) 20 7330 8583 or mjohn@spf.co.uk
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.
SPF Private Clients is authorised and regulated by the Financial Conduct Authority. The FCA does not regulate some types of buy-to-let, commercial, overseas mortgages and taxation advice. SPF Private Clients are not tax specialists therefore specialist taxation advice should be sought.