Is 'equity release' possible in France?
We live in France and own our house mortgage-free. We are 75 and 80 – can we release equity from our home? D.B.
Yes it is possible and the form that would suit you is called a prêt viager hypothécaire. It is a loan secured by a mortgage against your home and which (capital and interest) is only repayable from your estate after you die. Other forms of ‘equity release’ loan exist in France but involve repayment within a set time-frame.
The loan is offered by Crédit Foncier bank (https://agences.creditfoncier.fr) and is aimed at older people who own their home but have modest incomes. The bank revamped the loan in 2017 under the brand name Foncier Réversimmo and made it available to people aged 60 or over (previously 65) at a fixed rate of 4.8%.
It has now been announced that Crédit Foncier will cease new operations in early 2019. However, the parent group BPCE say nothing will change for those who have an existing loan and it expects the product to be taken up by another bank or banks for new customers.
The money is usually given as a lump sum with a deduction of an amount for set-up fees. The loan is for life, though it can conclude before if you pay it back early or sell the property. You should consider possible consequences for inheritance matters. If the debt to the bank on your death is more than the value of the property the difference is taken onboard by the bank, whereas if there is money left over, it goes to your heirs.
There is no requirement for a health questionnaire or to take out death or incapacity insurance.
The amount released will be a set percentage of the home’s value (typically 15-75%), based on your personal circumstances. In 2016 the average amount released was €100,000 and most borrowers lived in the Ile-de-France or Paca.
An alternative is vente en viager. This means selling to a buyer who pays a lump sum (below market value) plus a ‘rent’ for your lifetime. The property passes to the buyer on your deaths.
Reader's query answered by Hugh MacDonald
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