5. Types of Mortgage Loans in France
French mortgages are available in many different forms, but the main types of loan are as follows:
- Capital Repayment or Interest Only?
- Fixed or Variable Rate Mortgage?
- Bridging Finance
- Hybrid Mortgage
5.1. Capital Repayment or Interest Only?
French lenders offer the standard capital and interest repayment mortgage in the form of either straight line or increasing capital repayment plus interest, which is paid off each month over the duration of the mortgage.
The capital repayment mortgage is called a prêt amortissable / prêt classique.
The maximum amount of the loan is generally no higher than 80% of value, with rates that are fixed or variable.
Many lenders are not prepared to lend under a minimum amount. It is generally not less than €50,000, but may be as high as €200,000, particularly for non-residents.
Rates start a small percentage above Euribor.
Interest only mortgages mainly destined for landlords who wish to minimize their monthly revenue outlay.
The mortgage is also used by them because of the allowances on interest that are tax deductible on a property investment and rentals.
An interest only mortgage is called a prêt in fine.
In a strict 'interest only' mortgage, during the period of the loan the borrower pays only the interest portion.
Repayment of the capital is normally secured through an endowment policy taken out with the lender that pays off the capital at the end of the loan period.
There are variants on this approach, that do involve the repayment of capital during the later phases of the mortgage.
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