International mortgages in a diverse European residential property market

Central London, Europe’s biggest property hotspot, may have been showing signs of weakening recently, but elsewhere in Europe investor enthusiasm for residential real estate remains undiminished – and that means demand for international mortgages, under more for financing secondary properties is very strong. 

Finding the right funding option for international property purchases remains crucial for an appropriate wealth allocation. Historically, purchasers of property abroad have often done so by refinancing existing estate or by paying out of savings, but with interest rates at historic lows, international mortgages are an increasingly good value and readily accessible option for buyers who are looking for an alternative to selling part of their financial investments. Therefore, these type of credits become an important element of a private banking offering to its clients.  

For some buyers, finding the appropriate financing for their secondary property can be a challenge because of the reluctance of lenders to fund estate purchases for non-residents or properties located outside their domestic market. Mortgages on secondary properties have various clear advantages: aside from interest rate considerations mentioned above, they can help individuals match the currency of their income (whether rental or from salary) with that of expenses to avoid fluctuations in the value of repayments. The most appropriate currency is usually the one in which the underlying real estate is valued.  

Furthermore, international mortgages as certain other categories of deductible  debts may be used in certain countries to reduce the taxable base,. For instance in France, the wealth tax is calculated on real estate assets according to the owner’s net equity in a property.  

In practice, lenders tend to focus on fully completed residential properties. There are fewer options for off-plan purchases, although buyers may be able to obtain a mortgage only after the construction is fully completed. international mortgages may cover up to 100% of the value of the real estate purchased.

Generally in the private banking industry, these loans are provided with bullet repayment (repayment of capital and the end and periodical interests only) and up to five years. Nevertheless, amortising loans are also available, typically for tenors up to 15 years.  

At ING Luxembourg, we offer international mortgages to our private banking clients in order to finance the acquisition of their luxury residential properties located outside the Grand Duchy of Luxembourg. Building on our established expertise in luxury real estate markets we can provide mortgage loans with a focus on secondary residences in our core markets such as Belgium and the Netherlands, but also in France, Monaco, central London and Spain. Since a number of years we have developed a solid expertise on French property purchases.  

In conclusion, given the current environment, international mortgages are likely to grow in importance in the future as a funding option for many purchasers of property abroad and as being fully part of an appropriate and well thought wealth allocation.  

Any loan request must be approved by the bank’s internal committees and remains subject to (i) the acceptance by the client of the conditions imposed in this approval as well as (ii)  the execution of legal documentation satisfactory to the bank, as well as (iii) the receipt of any other required documents, if any, and (iv) the absence of any event(s) or circumstance(s) which could have undesirable effects for the bank.

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