French Mortgages for Home Energy Conservation
Tuesday 03 March 2009
The French government has launched an enticing package of financial incentives for homeowners to undertake energy conservation works.
Those who propose such works can obtain an interest free ‘eco-mortgage’, which can be used in tandem with tax credits that are also available for home energy conservation.
Whilst the incentives are only for works to the main home, (so second home owners cannot apply), landlords in France are eligible, provided the tenant occupies the property as their principal home.
The new mortgages for energy conservation, called l'éco prêt à taux zéro (éco PTZ), are available for a sum of up to €30,000, subject to a limit of €300 per m² of the property.
They are only available on a property constructed before 1st January 1990, as all properties built since this date should meet the minimum energy performance standards.
Repayment of the mortgage is over a period of 10 years, although in some cases the repayment period can be extended to 15 years. We await further elaboration of the regulations, but we assume that a longer repayment period will be available to those unable to repay the loan over 10 years.
The mortgages are offered without a test of resources, and neither are they subject to maximum income limits. This does appear to suggest that you may only be required to provide evidence of income if you seek repayment over 15 years.
Subject to a test of ability to pay, you can also make application to the bank for a standard mortgage to supplement any shortfall in the éco prêt.
The type of works envisaged by the regulations includes wall insulation, double and secondary glazing, new entrance doors, and replacement energy efficient space and water heating systems. The works will need to meet a minimum level of performance as set out in the regulations.
However, the mortgage is not available for a single element of energy conservation works; you will need to undertake simultaneously at least two forms of works to be eligible. In order to obtain the full €30,000 loan you will need to undertake at least three types of works; two forms of energy conservation will grant access to only €20,000.
Nevertheless, the loan might be particularly interesting, for instance, for those proposing to carry out a loft conversion, for the interest free mortgage could cover some or all of the insulation works to the roof space within which the new living space will be created. Note, however, that if you overtly make an application to create new living space in the attic, the loan is likely to be refused.
The loan is also available for other unspecified works of energy conservation, on the basis of a study of the property carried out by an accredited energy efficiency advisor. The minimum performance standard will depend on the current energy performance of the property. Only those properties built after 1st January 1948 are eligible.
A replacement of a septic tank system is also within the scope of eligible works. This would seem to open the possibilty of doing two types of works listed above, plus a replacement septic tank, to then obtain access to the full €30,000 loan, although the precise rules remain unclear.
The loans are available through the main French banks, to whom you should make application. The banks will receive a reimbursement of the interest forgone through a tax credit from the government. It is anticipated the loans will be available later this month, following finalisation of the detailed regulations and administrative arrangements.
You have two years from grant of the loan to complete the works, following which the lender will either need to arrange for inspection of the works, or receive a bill from the builder confirming the works have been completed.
You clearly need to take full professional advice before you embark on such a project, to ensure the energy performance standards are achieved. Be particularly careful about the building firm you choose to undertake the work. We would recommend strongly that you take advice on the project from your local home energy efficiency office, called Agence de l'Environnement et de la Maîtrise de l'Energie (ADEME). They also provide the application form you need to complete. Check with your local ADEME that, by the time you read this, the form is the most current version.
In addition to the interest free mortgage you can also be granted a tax credit, called un crédit d'impôt développement durable.
Only those whose net income per year does not exceed €45,000 in the year can be entitled to both the mortgage and the tax credit, although the 'reference year' for assessment of your income is your tax return for the previous year.
Even though you may not pay income tax in France, if you are resident, you can still receive a tax credit, in the form of a payment to you by the French tax authority.
We shall be examining in more detail the rules governing tax credits for home energy conservation in our next Newsletter, as the government have changed the rules of the game slightly from those that applied up to the end of 2008.
Apply for your French Mortgage today.
You can read more in our guide to Property Renovation in France.