The mortgage life loan market is mainly for seniors whose wealth is often their only main home and sometimes lacking cash.
This is a form of financing secured by a mortgage, regulated by the order of 23 March 2006 and the Consumer Code. Unlike a traditional loan, the repayment of principal and interest is deferred and payable at the end, that is to say either on the death of the borrower or on the sale of the property.
The amount of the loan may be paid at the option of the borrower and according to his needs at one time or in the form of an annuity.
The rent is freely fixed on one or two heads.
The amount of the loan depends on both the value of the housing appraised and several criteria regarding the borrower as his age.
In no case can it exceed the value of the property. In general, banks limit the loan to 70% of the value of the property.
The loan is necessarily backed by a mortgage. This can be taken only on real estate for residential use. The dwellings purchased for rent or second homes can therefore also be put in guarantee.
On the other hand, car parks, garages and other outbuildings will not be allowed.
The prior offer
The mortgage life loan is subject to the SCRIVENER Act 1. The lender must
send a loan offer, valid for 1 month. The borrower has a cooling off period of 10 days from the day after the first notification by mail before signing and making a commitment.
Namely: the loan contract is the subject of a notarial act since there is a mortgage registration.
The term of the contract
The contract ends on the death of the borrower or the last survivor in the case of co-borrowers or when the real estate subject to the mortgage is sold. The borrower can also prepay the loan.
In this case, the bank may request the payment of prepayment penalties. The law protecting the heirs, if the amount of credit and interest would exceed the value of housing, the bank would then make the difference at his expense.
The borrower is obliged to take care of the accommodation in “good father”. But know in case of dispute that regulation is vague in this area. It must also allow the lender to visit the accommodation at any time. If not, the lender will be able to demand full repayment of the loan.
Namely: it is also not possible to change the assignment of the property without the agreement of the lender. The mortgage life loan is little used in France unlike Anglo-Saxon countries, especially the United States (Reverse Mortgage or reverse mortgage ), traditional banks have not invested in this market.
Only a few specialized organizations currently offer this type of financing.
A high cost of credit
The cost of credit is particularly high due to the absence of capital depreciation. But the mortgage life loan can nevertheless be an interesting alternative and allow people without access to credit to benefit from cash.