5. Types of Mortgage Loans in France

1. 5.1. Capital Repayment or Interest Only?
2. 5.2. Fixed or Variable Rate Mortgage?
3. 5.3. Bridging Finance
4. 5.4. Hybrid Mortgage

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5.3. Bridging Loans in France - Prêt Relais

This is a mortgage facility for those purchasing a property who have yet to complete the sale of their existing property.

The loan is available for up to two years pending the sale of the existing property provided there is enough equity in it.

With the collapse of the financial markets in October 09 these type of loans are more difficult to obtain, but since the Spring of 2010 an increasing number of lenders are starting to offer them once again.

Normally only up to 60% of value of present home can be used in this way, although it may be higher if the lender considers the risk a manageable one.

The borrower generally only pays the interest element of the loan, with the capital being paid off on sale of their present property.

It is not unusual for lenders to convert a prêt relais into a long term mortgage loan.

There are four main types of prêts relais:

1. i. A loan of short duration on the current property with a normal repayment mortgage on the new property, where the value of the new property is greater than existing property.
   
   One of the difficulties of this mortgage is that the level of monthly repayments may exceed capacity to pay, in which case one or other of the other options may be more suitable.
2. ii. A loan on the current property with a repayment mortgage on the new property, but with no payments on the loan until the property is sold or a payment holiday for an agreed period.
   
   The interest on the mortgage is rolled up and paid off on the sale of the existing home.
   
   Needless to say this is an expensive option, particularly over a long duration.
3. iii. A single loan on both properties with interest only payable until sale of the existing home.
4. iv. A loan for those buying a property which has a lower value than the one being sold, where all that is needed is a short term bridging loan until the existing property issold.

Specialist lenders have many different schemes so you need to look around.

For eligible applicants it is possible to secure access to a discounted prêt relais as part of the ‘1% Logement’ scheme outlined in Section 7.

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