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Life mortgage
Verified 08 December 2021 - Directorate for Legal and Administrative Information (Prime Minister)
Guarantee given by the borrower to its creditor on a property belonging to it
Maximum interest rate for a loan, fixed by law and reviewed quarterly by the Banque de France
Corresponds to all calendar days in the calendar year, from 1er January to December 31, including public holidays or non-working days
Right to use property and to receive rental income from property without being able to dispose of it, including selling it
The right of an owner to dispose of a property without being able to use it, to enjoy it as a usufructuary, or to derive rental income from it. The non-owner can sell his property right, without selling the enjoyment of the property.
A life mortgage is a loan granted in exchange for a mortgage on a dwelling-place. It's a combination of life and mortgage. There are 2 life mortgage forms: there is the loan with repayment of principal and all interest at the end of the contract and the loan with periodic repayment of interest throughout the contract. Currently, this loan is marketed only by specialized institutions.
What applies to you ?
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Loan repayable on the death of the borrower
Project funding
A mortgage is a loan that allows you to review money by providing a house that belongs to you as collateral.
You can use the loan for a personal project (travel, car, stay in a retirement home), but not to finance a professional activity.
This type of loan is often used by seniors.
Difference from life selling and conventional mortgage
Mortgage life loans should not be confused with sale in life and the classic mortgage.
- In the case of a life sale, the property of the house is transferred to the buyer, while the mortgage life loan allows you to remain the owner
- The traditional mortgage requires you to periodically repay some of the principal and interest, while the life mortgage allows you to not repay any principal or interest during your lifetime
Data subjects
To apply for a mortgage life loan, you must own the home you want to pledge as collateral.
There is no obligation to take out home insurance or to insure the loan.
There is also no medical questionnaire to be filled out, nor any condition of resources to be filled out.
But you must be an adult.
Property concerned
The dwelling used as security must be for exclusive residential use. This means that it must only be used as a dwelling and not as a business premises.
This property may be a principal residence or a secondary residence or a rented property.
Warning
mixed-use residential and commercial real estate cannot be used as collateral for a mortgage life loan.
You can apply for a loan from a credit organization that offers this product.
The lender (called the lender or creditor) will then set the loan amount based on 3 criteria:
- Value of the property, determined by an expert, chosen by you and the lender (the expertise costs are at your expense)
- Your age (if you are young, the loan amount will be less important, as there will be statistically a long interest calculation period)
- Your gender (since women have a longer life expectancy than men, they also have a longer probable interest calculation time than men)
The creditor may refuse the loan if he considers, for example, that the property is likely to lose value.
If the application is accepted, the total amount of the loan does not correspond to the value of the property pledged as security, but only to a part. In general, the loan granted varies between 15 and 75% of the value of the property.
Warning
currently, life mortgage loans are offered only by specialized institutions.
The lender is required to set an interest rate that includes all the costs of the loan (application fees, interest, borrower insurance). This rate is called the annual percentage rate of charge and it's used to calculate the amount you have to repay if you want to make an early refund. This rate will also be used to calculate the amount owed by your heirs if they want to repay the bank and keep the property.
The lender is free to set the rate, and they're generally quite high.
However, the annual percentage rate of charge may not exceed wear rate over a 10-year period. There are 3 rates of wear and tear depending on the amount of the loan: amount less than or equal to €3,000, amount between €3,000 and €6,000 and amount greater than €6,000.
Interest is calculated over the life of the loan, but will not be repaid until after your death, or when the property is sold.
FYI
it is recommended to compare the total amount owed for a mortgage life loan with that of a conventional consumer credit for the same capital borrowed.
Mandatory information
Before signing, the bank must send you a loan offer that indicates the following:
- Identity of the parties (borrower and financial institution)
- Date and nature of the loan
- Exact description of the mortgaged property and its value
- Date and conditions for making available the borrowed sum (in one go or payment of a monthly annuity)
- Overall cost of credit and annual percentage rate of charge
There shall be a minimum of 10 calendar days between the receipt of this offer and the signature of the contract.
FYI
until the credit offer is accepted, the lender cannot make any payments to you.
Signature of contract
The signature is done in front of a notary.
Who shall I contact
The costs are at your expense.
The notary must check that the property has been correctly estimated.
Maintenance of the property
You must maintain the mortgaged property (facade renovation, various works, garden maintenance...). In the event of poor maintenance, the lender can claim early repayment of the loan.
An inventory may be annexed to the notarial act at the time of signature of the contract. It will constitute proof of the condition of the property and its equipment.
In the event of a dispute, it is up to the lender to prove that the property has been improperly maintained.
Rental of the property
If you wish to rent the mortgaged property, you must first obtain the written agreement of the lender. The mortgaged property may in no case be assigned to a professional activity.
The loan agreement can be terminated in several ways: early repayment, sale of the property, death of the borrower.
Répondez aux questions successives et les réponses s’afficheront automatiquement
Early repayment
You can fully or partially repay the loan before the end date specified in the contract.
However, the lender may refuse partial early repayment if it is less than 10 % of the capital lent.
The contract may provide for compensation to be paid to the lender in the event of early repayment of the loan.
This allowance varies depending on the date of reimbursement.
Before Grade 5
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
4 months interest
Periodically paid-up capital
5 monthly payments
Grades 5 to 9
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
2 months interest
Periodically paid-up capital
3 monthly payments
Starting at Grade 10
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
1 month interest
Periodically paid-up capital
2 monthly installments
Sale of the mortgaged property
You must notify the lender if you decide to sell your property or transfer usufruct or the bare-ownership.
If the lender disputes the sale price or the estimate indicated in the sales plan, he may request an expert opinion.
If the estimate is higher than the project price, the lender can have the property seized or obtain the value of the appraisal.
Death of the borrower
Your death terminates the loan agreement.
The situation varies depending on whether your heirs want to sell the property or keep it.
The heirs do not want to keep the property
Your heirs let the bank sell the property to pay it back.
If the amount of the sale is greater than the principal paid to you and the total interest calculated, your heirs will be able to receive the difference.
Otherwise, your heirs will not have to pay anything.
The heirs want to keep the property
Your heirs must pay the bank your debt, principal and interest calculated at the rate set in the contract.
After the payment, your heirs will be the owners of the property and they will be able to dispose of it freely.
Loan with periodic interest repayments
Project funding
A mortgage is a loan that allows you to review money by providing a house that belongs to you as collateral.
You can use the loan for a personal project (travel, car, stay in a retirement home), but not to finance a professional activity.
This type of loan is often used by seniors.
Difference from life selling and conventional mortgage
Mortgage life loans should not be confused with sale in life and the classic mortgage.
- In the case of a life sale, the ownership of the house is transferred to the buyer, while the mortgage life loan allows you to remain the owner.
- The traditional mortgage requires you to periodically repay some of the principal and interest, while the life mortgage allows you to not repay the principal during your lifetime.
Data subjects
To apply for a mortgage life loan, you must own the home you want to pledge as collateral.
There is no obligation to take out home insurance or to insure the loan.
There is also no medical questionnaire to be filled out, nor any condition of resources to be filled out.
But you must be an adult.
Property concerned
The dwelling used as security must be for exclusive residential use. This means that it must only be used as a dwelling and not as a business premises.
This property may be a principal residence or a secondary residence or a rented property.
Warning
mixed-use residential and commercial real estate cannot be used as collateral for a mortgage life loan.
You can apply for a loan from a credit organization that offers this product.
The lender (called the lender or creditor) will then set the loan amount based on 3 criteria:
- Value of the property, determined by an expert, chosen by you and the lender (the expertise costs are at your expense)
- Your age (if you are young, the loan amount will be less important, as there will be statistically a long interest calculation period)
- Your gender (since women have a longer life expectancy than men, they also have a longer probable interest calculation time than men)
The creditor may refuse the loan if he considers, for example, that the property is likely to lose value.
If the application is accepted, the total amount of the loan does not correspond to the value of the property pledged as security, but only to a part. In general, the loan granted varies between 15 and 75% of the value of the property.
Warning
currently, life mortgage loans are offered only by specialized institutions.
The lender is required to set an interest rate that includes all the costs of the loan (application fees, interest, borrower insurance). This rate is called the annual percentage rate of charge and it's used to calculate the amount you have to repay if you want to make an early refund. This rate will also be used to calculate the amount owed by your heirs if they want to repay the bank and keep the property.
The lender is free to set the rate, and they're generally quite high.
However, the annual percentage rate of charge may not exceed wear rate over a 10-year period. There are 3 rates of wear and tear depending on the amount of the loan: amount less than or equal to €3,000, amount between €3,000 and €6,000 and amount greater than €6,000.
The amount of the periodic interest payments must be specified at the outset. You have to repay these maturities during the term of the loan.
FYI
it is recommended to compare the total amount owed for a mortgage life loan with that of a conventional consumer credit for the same capital borrowed.
Mandatory information
Before signing, the bank must send you a loan offer that indicates the following:
- Identity of the parties (borrower and financial institution)
- Date and nature of the loan
- Exact description of the mortgaged property and its value
- Date and conditions for making available the borrowed sum (in one go or payment of a monthly annuity)
- Overall cost of credit and annual percentage rate of charge
- Amount and date of periodic interest payments
There shall be a minimum of 10 calendar days between the receipt of this offer and the signature of the contract.
FYI
until the credit offer is accepted, the lender cannot make any payments to you.
Signature of contract
The signature is done in front of a notary.
Who shall I contact
The costs are at your expense.
The notary must check that the property has been correctly estimated.
Maintenance of the property
You must maintain the mortgaged property (facade renovation, various works, garden maintenance...). In the event of poor maintenance, the lender can claim early repayment of the loan.
An inventory may be annexed to the notarial act at the time of signature of the contract. It will constitute proof of the condition of the property and its equipment.
In the event of a dispute, it is up to the lender to prove that the property has been improperly maintained.
Periodic repayment of interest
You must pay the monthly interest payments provided for in the contract.
Failure to repay one or more periodic interest payments shall be punished by the payment of compensation of up to 4 months' interest.
In addition, the lending institution may require the repayment of all the capital lent.
Rental of the property
If you wish to rent the mortgaged property, you must first obtain the written agreement of the lender. The mortgaged property may in no case be assigned to a professional activity.
The loan agreement can be terminated in several ways: early repayment, sale of the property, death of the borrower.
Répondez aux questions successives et les réponses s’afficheront automatiquement
Early repayment
You can fully or partially repay the loan before the end date specified in the contract.
However, the lender may refuse partial early repayment if it is less than 10 % of the capital lent.
The contract may provide for compensation to be paid to the lender in the event of early repayment of the loan.
This allowance varies depending on the date of reimbursement.
Before Grade 5
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
4 months interest
Periodically paid-up capital
5 monthly payments
Grades 5 to 9
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
2 months interest
Periodically paid-up capital
3 monthly payments
Starting at Grade 10
The amount of compensation varies depending on how the loan is made available.
Paid-up capital in one go
1 month interest
Periodically paid-up capital
2 monthly installments
Sale of the mortgaged property
You must notify the lender if you decide to sell your property or transfer usufruct or the bare-ownership.
If the lender disputes the sale price or the estimate indicated in the sales plan, he may request an expert opinion.
If the estimate is higher than the project price, the lender can have the property seized or obtain the value of the appraisal.
Death of the borrower
Your death terminates the loan agreement.
The situation varies depending on whether your heirs want to sell the property or keep it.
The heirs do not want to keep the property
Your heirs let the bank sell the property to pay it back.
If the amount of the sale is greater than the principal paid to you and the total interest calculated, your heirs will be able to receive the difference.
Otherwise, your heirs will not have to pay anything.
The heirs want to keep the property
Your heirs must pay the bank your debt, principal and interest calculated at the rate set in the contract.
After the payment, your heirs will be the owners of the property and they will be able to dispose of it freely.
Definition and scope of the mortgage life loan
Life Mortgage Credit Agreement
Assignment and maintenance of the building
Early repayment of mortgage life loan
Life Mortgage Loan Operation Term
Life mortgage
FAQ
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