Equity release in France - the facts

France's equivalent of equity release is known as prêt viager hypothécaire.

These are life-long mortgage loans which are secured on a property. The main elements of the loan are the following:

It is available for those over the age of 65, which means in the case of couples they both must be over 65.

The maximum amount of the loan is fixed by law, and, where couples are concerned, based on the younger age. These are as follows:

to age 70 - 18% of the property value
to age 75 - 25% of the property value
to age 80 - 34% of the property value
to age 85 - 44% of the property value
to age 90 - 53% of the property value
to age 95 - 61% of the property value

The interest rate is currently 8,80% annually.

The interest is compounded, that is to say that the interest is calculated on the outstanding balance of both the original loan and the accumulated interest, and then added to this combined outstanding balance.

The loan can be repaid whenever one wants, irrespective of the reason for making the repayment.

Subject to the new property values, the loan can be transferred to a new property.

As one becomes older, it is possible to obtain more of a loan in accordance with the age and maximum loan table above.

There is a 4% application fee, normally taken from the loan amount itself, thus reducing what you would in fact finally receive.

In addition, there will be notarial fees based on the value of the property, but its probably best to presume these will be in the region of at least 1%.

Further factors

With regards to the amount eventually obtained through the prêt viager hypothécaire, and despite the maximum lending percentages above, there are other factors which may in fact decrease the amount finally obtained.

These factors would, in the main, be issues likely to affect the property value, such as:

The actual valuation of the property given by the lender as opposed to the owner.

The area and surrounding location of the property.

The likely impact of future property or other developments in the area.

The state of the property now, and the influence of time on this state.

However, there are other issues too, such as:

Whether or not the husband is the elder of the spouses, and the age gap between the spouses.

It should also be noted that it takes some time for one of these mortgages to go through to fruition because of the searches and verifications that need to be performed - especially so for foreign nationals.

Allow four to five months to complete the process. By the time of the formal offer which will be made to you in writing and also in the presence of the lender themselves at their offices, you will then have eleven days in which to either accept or reject their offer, and therefore the loan.

Contrary to UK equity release schemes if the value of both the loan and the interest is in excess of the value of the house, then the debt repayment is restricted to the value of the house and to no more.