Personal contribution in the high-end real estate segment follows different dynamics from standard property purchases. While banks typically require a minimum of 10% to cover notary fees, prestige acquisitions generally require a 30% to 50% contribution, or even more for exceptional properties exceeding €5 million. Paradoxically, this affluent clientele has the liquidity but often prefers to optimise its contribution in order to preserve cash flow and investment opportunities. Between reinforced banking requirements and sophisticated wealth strategies, the personal contribution becomes a financial optimisation lever rather than a simple constraint.
Do banks require a higher contribution for high-end real estate?
Yes. High-end real estate presents specific risks that banks logically offset by increasing the required level of personal contribution.
Liquidity is a first risk factor: a €3 million apartment on Boulevard Saint-Germain is harder to sell than a standard studio. The luxury market is narrower by nature and subject to significant price fluctuations depending on international economic conditions and real estate taxation.
Banks also apply strict prudential ratios beyond certain thresholds. For a €2 million property, the minimum contribution is around 30%. Above €5 million, banks commonly require 40% to 50%.
This caution is explained by the fact that, in the event of default, the forced resale of an exceptional property systematically generates variable discounts depending on the market and the uniqueness of the asset. A substantial contribution protects the bank against this potential loss in value.
How should the contribution for a property purchase be calculated?
The real question is not “how much can I borrow?” but rather “how much should I borrow?”. In practical terms, an entrepreneur with €5 million in liquid assets purchasing a €4 million private mansion could theoretically pay cash.
However, this could be a strategic mistake: with credit rates and diversified investments capable of generating higher returns depending on the accepted risk profile, the leverage effect of borrowing may remain advantageous.
Concrete example: here is how to calculate the optimal contribution for a €3 million property.
- With a 30% contribution (€900,000), a €2.1 million loan over 15 years results in monthly payments of approximately €15,000.
- With a 50% contribution (€1.5 million), monthly payments fall to around €10,500.
The additional €600,000 contribution saves €4,500 per month. There is no absolute right answer; the trade-off depends on your alternative investment opportunities and your risk tolerance. If your investments generate higher after-tax returns, retaining liquidity may be the more relevant option.
Which sources can be used to build up a contribution?
Premium clients have access to diversified sources of contribution. Disposal of financial assets remains the most common: sale of a securities portfolio, partial surrender of a life insurance policy, exercise of stock options, etc. Attention should be paid to tax optimisation: capital gains on securities are taxed at 30% (flat tax), although certain structures allow this taxation to be deferred or reduced.
Lombard loans offer a more sophisticated alternative. You borrow against a pledged securities portfolio without selling it, thereby preserving latent capital gains and dividends. Interest rates vary according to the quality and volatility of the pledged assets, as well as the required coverage ratio. A high-quality diversified portfolio can allow borrowing up to 50% of its value while structuring the definitive financing.
The sale of an existing property obviously generates a substantial contribution. However, timing can be an issue: selling before buying exposes you to the risk of not finding a suitable replacement, while buying before selling requires a costly bridging loan.
As such, sale with buy-back (réméré) or lease-back arrangements on your current residence can unlock liquidity while allowing continued use of the property.
Should borrowing be maximised despite having a substantial contribution available?
The temptation to pay cash remains strong in high-end real estate. Paying outright avoids interest costs, simplifies the transaction, and strengthens your negotiating position (making an offer without a financing contingency is attractive to sellers).
However, this strategy should not overlook wealth optimisation. Intelligent leverage offers several practical advantages:
- Tax-related: loan interest is deductible from rental income.
- Wealth management: retaining liquidity allows you to seize other opportunities.
- Estate planning: debt reduces the taxable base of your estate. A €2 million loan on a €4 million property halves the net taxable value for your heirs.
What should be known about contributions in complex acquisition structures?
Prestige acquisitions often rely on sophisticated structures, a few simplified examples of which are outlined below.
- Disaggregated ownership purchases: the usufructuary contributes 40% for temporary usufruct, while the bare owner contributes 60% to regain full ownership after 15 years.
- Purchases via an SCI with differentiated contributions: one partner provides cash, another contributes an existing property, and a third brings borrowing capacity.
These structures require expert guidance to be optimised for each specific wealth situation. The key stages of a prestige property purchase integrate such arrangements from the outset.
To this end, a family office structures the acquisition to optimise the contribution: typically a Luxembourg holding company for non-residents or a corporate-tax SCI for investors.
To optimise your personal contribution in the acquisition of exceptional properties, Consultants Immobilier and its network of 18 agencies leverage their expertise in the premium market, their privileged relationships with private banks, and their mastery of complex wealth structures, ensuring a rational financing strategy for your prestige real estate project.