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Real-Estate Mortgage
Real-estate mortgage is a highly important financial service in the Principality of Monaco since its lifestlye, the political and economic landscape are all attracting the high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals.
One would assume that the wealthy never takes a mortgage, but that is not so. Generally speaking most of the Monaco residents do not need a loan, however wealthy people like to increase their wealth by making smart decisions. Paying in full for a multi million euro worth property is not necessarily a smart idea. It can result in having one’s money stacked there forever. Instead, most wealthy people prefer liquidity, since utilising part of their cash flow can bring them much more results.
Addressing the liquidity challenges in 2020/2021 will be also among the key factors in the real-estate sector of the Principality of Monaco. Many businesses were influenced by the Coronavirus pandemic, and despite the government aids, short term liquidity problems can arise.
We often have conversations with Olivier Milliex, the owner of OMYS Monaco and his wife Maya Ivdra, from Monaco Villas about the importance of real-estate financing and re-financing in Monaco.
First of all mortgages in Monaco have historically low interest rates, which motivate many people to remortgage or restructure their borrowings. Basically, by converting one’s mortgage to free-up liquidity for personal or business commitments can assist with short-term liquidity problems, and it can immediately increase the cash flow.
There is also a great demand for and more people are looking towards second charge mortgages and bridging finances. These allow the owners to use additional collateral and equity in their properties in order to almost immediately release capital.
When I work with Olivier he has this “four steps” method he uses.
1., Identifying property type & eligibility
It is important to highlight that just as you have a special taste when you choose your home, banks and lenders are also picky on where they put their money.
In the Principality of Monaco the typically accepted properties are the standalone villas and the large apartments. However, mortgage is not limited to private homes, you can use it with mixed-use buildings and high-end retail spaces, such as boutique spaces. This can significantly help entrepreneurs to have an additional cash-flow when their business needs it.
2., Understanding client needs
As easy as it sounds, getting a loan is much more complicated. There are countless opportunities for owners, based on what they really need. Just a few examples are the amortizing loan, interest only loan, remortgage, second charge mortgage, bridging, short-term finance, commercial lease, business loan, overdrafts and many more others.
There is always a comprehensive range of efficient financial products available.
3., Choosing the right financial instrument
Understanding one’s specific needs can help to identify the right financial instruments. Also it is always important to look for the most competitive lender for the project.
A good partner can always lift the stress from one’s shoulder by helping them to draft the credit and compliance memorandums, and to negotiate with the credit committee until the final decision. At the end of the day financial advisors can speak the same “language” as the lenders.
4., Structuring a turn-key solution
High-end asset optimization and finance never stops by drafting the application. Financial advisors can help to coordinate with all relevant third parties to structure the transaction and advise the client until final implementation and drawdown of funds.
At the end of the day if you decide to look for real-estate financing in Monaco, I would suggest to look for someone who provides accurate, timely, high quality analysis and advice to decision-makers. This can be highly important because along the road you might face various challenges and they can help you to solve them. For instance, getting the correct valuation for your property is often highly subjective in Monaco and without an agreement on the valuation, the views of the lender and borrower will never meet.
A good financial advisor can support one’s needs with instant property value comparables and they can mitigate any issues, which may arise during the process.
Always be upfront and transparent with your financial advisors. Many people make the mistake that they “forget” to mention that their deal was already presented to banks and might be rejected. If your financial advisor does not know about this, then it can happen that the same request will be presented again to a bank, which can create a negative taste. By being transparent from the very beginning, you can achieve more. Just trust the skillset of your financial advisor.
You should never forget that the Principality of Monaco is a “village”, a face-to-face type of world where everyone knows everyone. In this specific market a well-connected financial advisor can seal the deal for you.
Also, I consider as a key factor in every business area, that the selected partner has to be involved and able to advise through the whole process of acquisition and finance. One should never be satisfied with a partial solution. Always look for someone who is there for you all the way along, from the start until the finish line.
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