The Wealth Report takes a look at the recent reported purchase of the French Riviera Villa Leopolda for $750 million by an unnamed Russian. The blog estimates the cost of financing such a purchase:
Of course, Blingsheviks prefer to pay cash. Buying real estate in the Med has become a favorite strategy for Russians trying to find a place to stash their commodities cash. Yet just for fun, I decided to figure out what it would cost to finance the Villa at a time of rising interest rates. Clearly, this would exceed the Fannie Mae limits and would count as a nonconfirming loan.
Let us assume the buyer was able to finance at the standard 80%. That means he would put up about $150 million and borrow $600 million. At current private-banking rates for a 30-year fixed-around 6.5%-his monthly payments would be $3,792,408 a month. Yes, a month.
That works out to $45,408,898 a year, or $1.3 billion over the life of the 30-year loan, proving once again why it pays to pay cash for your French castle.