capital backed mortgage?

[chessfou]

Can anyone point to any mortgage providers (preferably in France) who will lend against

capital rather than income for purchase of a property in France?

Essential information:

(1) We (wife and I) want to retain a capital sum (ca. EUR 150k-200k) in either P.E.A.

(once French resident) or ISA/PEP (or split between the two) - all "self-select" (i.e.

self managed);

(2) Mortgage (prob. EUR 100-150k, say 60% of purchase and renovation cost) can be

either repayment or interest-only (if that exists in France - I've not seen any yet);

(3) Probable loan duration - 10 years;

(4) we will be French resident from mid 2006;

(5) we are likely to want to purchase in 2007 (or 2008).

Objective:

Instead of using "cash" to purchase a property, to keep it working (earning far more in

ISA/PEP over the years and, therefore, within a PEA) while using it as security for the

loan.

[If absolutely necessary we will re-arrange things to have sufficient income to cover a

typical "mortgage à la Française" but we don't want to take that much income unless we

absolutely have to - we would much prefer to keep the capital working.]

[makeiteasy]

Dear Chessfou,

i manage that kind of mortgage, BUT nevertheless your income will be taken into consideration to know if you would be able to repay your installment.

The only case where your income doesn't matter is if you have 100% of the capital you intend to borrow[:^)](you could ask me why in that case you would need a mortgage...but it could be usefull for wealth taxes or to cover your family during the mortgage period, i.e you set up a mortgage guaranteed by a "death" insurance during 10 years and you secure it against a saving (mainly life insurance or "assurance vie").If you die your family don't get only the house, but get the house more the money invested!!!

[chessfou]

[quote user="makeiteasy"]

The only case where your income doesn't matter is if you have 100% of the capital you intend to borrow.

[/quote]

That is precisely the point (we actually have 200%-300% of the amount we may borrow).

But we don't want the money tied up in an AV, we want it to be

(preferably) in a PEA (Plan d'Epargne en Actions) or (second best - in

a UK ISA/PEP).

[makeiteasy]

Well, if you prefer to invest your money on a PEA than an Ass Vie, you would have to invest between 125 to 150% of the mortgage amount to secure the possible loss of your investment.

[*]I remember you that to be able to get a PEA you should pay taxes in France and minimum 75% of the shares invested should be european shares.

[chessfou]

[quote user="makeiteasy"]

Well, if you prefer to invest your money on

a PEA than an Ass Vie, you would have to invest between 125 to 150% of

the mortgage amount to secure the possible loss of your investment.

[*]I remember you that to be able to get a PEA you should pay taxes

in France and minimum 75% of the shares invested should be european

shares.

[/quote]

Good - sounds like excellent news!

You see I have quite a good track record - making net gains of an

average 27% over the six years 2000-2005 (respectively +25%, +15%,

+42%, +30%, +22%, +30%) - which is obviously rather better than one

could possibly expect from an AV. Of course, there are no guarantees

but that record gives me good grounds for expecting this approach to be

worthwhile for us (even if my future performance is less good than my

past performance).

Are there many providers who will do this?

Will any of them do it as an "interest only" mortgage (paying interest

only during the mortgage term, the capital sum being paid off at the

end - after something like 10 years - at least 8 years because of the

restrictions on a PEA - I would want to keep the PEA open after

withdrawing the capital sum to repay the mortgage, and that means no

withdrawal before 8 years).

[PS. I thought 100% of PEA shares had to be EU shares (+Iceland &

Norway) but that is fine either way since probably 90% will be in UK

shares]

[makeiteasy]

It should be an interest only mortgage .You could keep your PEA 10 years if you wish, 8 years is only available if you want to put some money in(after 8 years, it's no more possible but you could withdraw just a part of your investment instead of the whole one).

Well, if you are interested contact me.[:D]