Interest Free French Mortgages for Home Energy Conservation
Tuesday 16 September 2008
Interest free mortgage loans of up to €30,000 are to be introduced for those who undertake energy conservation works in their home.
The new loan has been given the appellation prêt à taux zero écologique.
The loan will not be subject to any means testing, so whatever your level of income you will be eligible to apply, subject to a test of ability to repay.
Second home owners need not apply, as it will only be available for the principal home, although it is rumoured landlords may also be able to benefit from it.
The loan ceiling is also subject to it not being greater than €300 per metre square for the property. Accordingly, it is going to be more beneficial to those living in smaller properties, who might be able to cover all of their costs through the loan. Nevertheless, even for those with larger homes, the loan is potentially large enough to cover a substantial energy conservation project.
The loan will be reimbursable over seven years. Thus, if you borrowed €10,000 over 7 years, your monthly repayments would be €119. That is a saving of around €2000 on a mortgage that you might otherwise have taken out.
If you took out a loan of €20,000 over 7 years, your repayments would be €238 per month, a saving of around €4000 on a standard French mortgage. At €30,000, you would repay €375 a month and save around €6500.
However, you will not be able to obtain access to the loan by merely putting in loft insulation or double-glazing. Potential beneficiaries will need to demonstrate that they will carry out a package of works to the property, although the minimum amount of works to retain eligibility has yet to be determined. On completion of the works the property will also be required to meet certain norms of energy efficiency, the details of which are awaited.
The government already grants tax credits for those undertaking home insulation works, but it is unclear whether these credits will be available to those benefiting from the tax free loan.
Nevertheless, if you are unwilling or unable to undertake the works package to gain access to the loan, the tax credits are an excellent money saving measure for undertaking individual works (installation of wood burner for instance). You do not need to be a taxpayer to benefit from these credits. Read more about energy conservation in France.
It will be possible to use the interest free loan in tandem with a mainstream mortgage. Thus, someone purchasing a property for renovation would be able to make application for the interest free loan, alongside the main mortgage.
The government estimates the cost of this measure to be around €1 billion a year, but it has yet to confirm just how it is to be financed, if not by a further increase in the level of the public debt.
The detailed regulations have yet to be published, but it is intended that the loan will be available through the main banks from 2009.