Lifetime Mortgages in France
Tuesday 04 April 2017
A leading French bank has launched a new fixed interest lifetime mortgage offer, lowering the eligible age limit to 60 years.
A lifetime mortgage is one in which you borrow money against the value of your home, with the mortgage repaid following your death.
In France they are known as a prêt viager hypothécaire.
Although such mortgages are now a well-established product in the UK and many other countries, it is a small market in France, historically due to legal constraints, but also to a lack of interest amongst lenders.
There is only one offer in the market place, which comes from Crédit Foncier, the specialist mortgage arm of the retail bank BPCE (Banque Populaire Caisse d‘Epargne).
In the past, their offer has not been a particularly attractive one, with a rate of interest of around 8%, fees of around 4% and a small loan-to-value ratio of around 20% to 30%. The minimum age limit was also 65 years.
With few households willing to accept an offer on such poor terms, Crédit Foncier have recently relaunched the product, with a fixed rate of interest of 4.8%, open to candidates from the age of 60 years.
The new product has been branded ‘Foncier Réversimmo’. (UPDATE: CF have been closed and lifetime mortgages no longer available - 2019)
The amount of the loan is determined from the value of the property and the age of the lenders. The older the lender the higher the LVT, conversely, a person aged 60 years will obtain the minimum LTV. No medication examination is necessary.
No repayments of the mortgage would be required during the lifetime of the lenders, with the load repaid on death. If the value of the property exceeded the amount of the debt the balance would be reimbursed to the inheritors of the estate; if the debt was greater than the value of the property the difference would be supported by the bank, with no recourse to inheritors.
Inheritors would also have the option of retaining the property by repaying the debt. In other words, the debt would be reversible.
By way of an example of how the loan would operate Crédit Foncier cite a couple aged 85 and 83 years, who take out a loan of €150,000, on a property with an estimated value of €320,000.
In such an example the fees in connection with the loan would be €8,000 and the notaire costs and taxes associated with the mortgage a further €3,000, giving a total of €11,000 in charges.
As a result, the basic rate of 4.8% becomes around 6% annual percentage rate, still a relatively high rate of interest, given the low general mortgage rates currently in the market.
Remember also that interest is payable on the total compound debt outstanding, a sum that will increase significantly each year, with the result that the debt/equity relationship may well change over time.
Thus, if the value of the property does not increase at the same rate as the level of the debt, then the bank will control a higher percentage of the value of your home.
Strictly, speaking these loans are available to anyone who is legally resident in France, as the bank is barred from discriminating on grounds of nationality. However, we have received numerous e-mails from readers in the past, stating that they have been refused such a loan by CF, without explanation.
We have attempted to obtain an explanation from CF as to why the applications have been turned down, but they have been equally unwilling to provide reasons.
One such reason may well be that most of the loans are only granted to those resident in a regions with a strong housing market – such as Ile de France or the Côte d'Azur – but there could equally be other reasons.
We would be most interested to hear from you if you have been refused such a loan. You can contact us at firstname.lastname@example.org.
Beyond lifetime mortgages, if you may be interested in seeking a mortgage in France you can visit French Property Mortgages to explore the options available to you.