5. Types of Mortgage Loans in France

1. 5.1. Capital and Interest Repayment
   5.2. Interest Only
   5.3. Bridging Finance
   5.4. Equalising Mortgage
   5.5. Equity Withdrawal
   5.6. Home Income Plans/Lifetime Mortgages

5.5. Equity Withdrawal French Mortgages

As we mentioned previously, if you have no existing mortgage on your property there is no reason, in principle, why you cannot obtain a normal repayment mortgage on the property from a lender to fund home improvements, the purchase of a car or other expenditure.

Naturally, you will need to meet the usual criteria of the French lenders, most notably that the total level of debt repayments cannot exceed 33% of your total income.

You will find that if you are seeking funds for home improvement, a mortgage is likely to be cheaper than if you are seeking the funds for other types of expenditure, e.g. car purchase.

Where you already have an existing French mortgage on your property then, hitherto, the rules have not permitted the creation of a second mortgage charge on the property.

The rules have more recently been changed along the lines more familiar to Anglo-Saxons.

A second mortgage can now be raised against equity in the property up to 70% loan to value, provided you meet the usual income criteria.

In general, you will not be able to borrow more than the total amount of the original mortgage.

Thus, if you took out a €100,000 mortgage 10 years ago and you have repaid €40,000 of that mortgage, you will able to ‘recharge’ the existing mortgage by the same amount.

This new, additional mortgage can be from a lender other than the existing lender.

In principle, the mortgage can be used for any manner of expenditure, such as home improvement, loan consolidation, car purchase, property purchase etc.

Initial signs suggest a cautious approach is being adopted by the lenders. Indeed, few lenders of this product are yet in the market place, with Crédit Foncier, L'Union de Crédit pour le Bâtiment (UCB), Caisses d'Epargne and Banque Privée Européenne (BPE) the main current lenders.

If you are concerned about inheritance tax or wealth tax, then it may be a solution to reducing your potential liability, by creating a debt against your assets. It is also going to be a cheaper source of capital than an unsecured loan.

As this is a new product on the market we have few details on the terms of these offers, but as information becomes available we will update these pages.