Transaction of the month – €2.5m ski chalet loan

French Alps property market trends

 

This month we received an agreement for a loan at €2.5M euros on a property in the Alps valued at €6M. The rate on the loan is 3.2% fixed for 9 years on an interest only basis. This rate represents excellent value as the recommended rate for the French government to borrow at ( the TEC 10 index) is currently 1.8% meaning this loan has an effective margin of 1.4%. It generally takes a little while to get such loans agreed as they must go to a national committee to be agreed. At these committees an analyst from the bank presents the case to senior managers from across the various functions of the bank in order to get their agreement.

Usually for loans of this size some form of SCI (an SCI is a very common way to buy property in France and is essentially a French civil property holiday company) would be required as this makes it easier and faster for the bank to begin the sales process of the property in the event of a default. In this instance as the LTV is less than 50% this will not be necessary and neither will French life assurance.