Advice on mortgage for second residence construction in France

Hello! We are planning to build a chalet in the French alps as a second home, we currently live and work in Geneva. After months we finally got the planning approval and can now start to look at locking mortgage rates in.

Due to it being a new construction, in France, as a second home there´s not a lot of banks who will lend to us. However, Credit Agricole Next Bank have approved it, when we. They however haven´t yet given us a rate. When we first discussed the project with them in January 2022 the 10-year fix was 1.53%. However we couldn´t lock the rate with them until we have the planning permit. Now on their website I see the 10-year fix is a whopping 3.19% !

I´m wondering if they would offer a SARON mortgage, which seems much more attractive. Does anyone know if banks will typically offer SARON for a second home? And if anyone knows of any other bank to approach would also be highly appreciated!

Thanks in advance.

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I know of someone who very recently got a SARON mortgage for a holiday home from ZKB. I don’t see why a bank wouldn’t offer SARON for a holiday home. This was for a house in Switzerland, though.

As your house will be built in France, wouldn’t it make more sense for the mortgage to be in EUR? If the Euro weakens against CHF, the market value of the house will likely drop as well from a CHF perspective. I wouldn’t want to have CHF debt for an asset with a strong tie to another currency. Your mortgage might even be underwater solely due to changes in the exchange rate.

With your income presumably in CHF, it should be less of an issue than e.g. the CHF mortgages in Poland, however, I think I’d still prefer a EUR mortgage in your case.

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Good feedback. Indeed I´ve thought long and hard about the currency exchange risk. But since

  1. We can use a swiss style mortgage with 50% amoritization we will have much smaller monthly payments
  2. The EUR is already very weak to the CHF. It feels like the right time to invest in EUR now.
  3. As you noted, our income is in CHF

It´s a hard call, but for the moment it feels like the best option.

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a) Swiss banks won’t offer you a mortgage overseas. You’ll need a French bank or Credit Agricole Next. I expect they can offer you variable rates

b) I second the advice to consider a EUR mortgage so that you hedge your currency exposure by keeping your assets and liabilities in the same currency. It reduces your risk of going into negative equity

I know people who got burned taking 1.5 M CHF mortgages to buy property in France when 1 Euro =1.5 CHF. House prices in France declined in Euros and EuroCHF also went down sharply to 1.2 → now 1.01

c) CHF has steadily strengthened against EUR and USD over time (couldn’t see what assumption they make for EUR pre- 2000 below , might be DM or a basket or Euro currencies):

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French resident colleagues did it with Credit Agricole and Credit Mutuel bank based in Annemasse or Ferney-Voltaire in France.
These banks are able to deliver CHF mortgage, with CHF currency account (but FR IBAN) where you can wire your CHF.

I am doing it with Revolut to avoid international transfer from CH IBAN to FR IBAN (Revolut got European IBAN with Lithuania).

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If you want to use a Swiss lender, you are pretty much limited to Credit Agricole Next Bank. Possibly CIC Bank. So there isn’t much competition there. Have you checked into mortgages from French banks? You would definitely have a lot more options to choose from.

You will likely be able to get a SARON mortgage once the property is built. But until then you need to use a construction loan, and these generally have higher interest rates than mortgages. If you want a low-cost mortgage off the bat, consider buying a house that’s already completed.

I’m not sure about Credit Agricole Next Bank specifically, but as far as I know, when Swiss banks accept mortgages on properties outside of Switzerland, the local mortgage rules apply. This is the case with all Swiss banks that let you mortgage homes in Germany. The German amortization rules apply. So no Swiss-style amortization. But maybe the situation is different for France/Credit Agricole.

I agree that it’s a good time to buy in euros.