The aging of the population raises many questions in terms of cost for accommodation, care, assistance to the elderly and disabled. The main concern is to ensure that seniors can stay as long as possible at home, in an environment suited to their eventual disability, comfort and security.

This necessarily involves the adaptability of the housing to the physical needs of the elderly.

Therefore, the French government has foreseen a " reverse mortgage" since 2006, allowing the owner of a property (75% of seniors are homeowners) to obtain money through a loan secured on his property, repayable at his death or when the property is sold.

This law (No. 2006-346) of 23 March 2006 enables senior homeowners to take advantage of new financial resources (e.g. to perform construction work, improve daily life etc.) while continuing to occupy their homes.

This facilitates the financing of services concerning personal assistance (home help, shopping, gardening, etc..), through the use of the French "CESU" for example, a "luxury" which the elderly often can't afford when the income comes solely from retirement.

 

The loan can cover the principal dwelling of the borrower, or a second home or a rental property.

 

During its first year of release - between June 2007 and July 2008-4400 "reverse mortgages" have been approved for a total of 380 million Euros.

These encouraging results led the legislature to clarify certain features of this product in the more recent "law on the modernization of the economy" of August 5, 2008, specifying that the system allows:

 

* an opportunity to capitalize interest,

* a withdrawal period,

* to stipulate the conditions in the contract under which the borrower may accelerate payment of the loan (highly recommended)

etc..

 

Characteristics of the loan

 

As an indication, at 65, a borrower can get 16% of the value of his property, while when 95 years old, he can expect a loan of up to 66% of the price of his house.

The system is more favorable to men whose life is shorter (according to the report Boulmier October 2009).

 

The loan rate is approximately the double of the rates currently offered on conventional mortgages with fees: firm negotiation in here can considerably lower this rate, depending on the value of your house and your own firmness in here.

 

No questionnaire on health status is claimed and the amount of the loan is determined by two criteria: the age of the borrowers and the value of the house.

 

During his lifetime, the borrower doesn't reimburse anything, the reimbursement to the bank becomes effective upon the death of the borrower by selling the property. The possible surplus after sale is redistributed amongst the heirs.

On the other hand, if the property didn't bring enough to repay the loan and interest, the heirs owe nothing. The borrower (or a heir) can also repay the loan in order to keep the property in the family.

 

In addition, the legislature has equipped this contract with various guarantees: "door to door" solicitation is prohibited, one can negotiate the possibility of anticipated reimbursement and the bank's penalties in that case are limited by law, and this reversed mortgage contract and publicity are subject to precise legislation: the loan can only be accepted after a period of 10 days (just as other mortgages: this is what the French call the "reflection period".

 

The borrower can always terminate the loan agreement by reimbursing the full amount due, principal and interest.

If the borrower has opted for a lump-sum payment at once, it may, at its option, redeem some of the money. However, the lender may refuse the proposition if the partial refund corresponds to less than 10% of the paid-up capital.

 

As provided above, in the event of an early repayment, the lender is entitled to demand compensation which may, without prejudice to the application of Article 1152 of the Civil Code, exceed an amount which, depending the contract, may not exceed an amount corresponding to the following terms:

 

When the principal amount of the loan capital is paid in one single payment:

- 4 months' interest on the principal amount, the interest rate of the loan contained in the loan agreement, if the request for redemption is made between the first year of the loan and the end of the fourth year;

- 2 months interest on the principal amount, the interest rate of the loan contained in the loan agreement, if the request for redemption occurs between the fifth year of the loan until the end of the 9th year ;

- 1 month interest on the principal amount, the interest rate of the loan contained in the loan agreement, if the claim comes from the 10th year;

 

When the principal amount of the loan is paid in periodical installments:

- 5/12 payments due for the first year, if demand for "prepayment" is done between the date of first disbursement of the loan and the end of the fourth year;

- 3/12 of the total payments the first year, if demand for "prepayment" occurs between the fifth year of the loan until the end of the ninth year;

- 2/12 of the total payments the first year, if the claim is done after the 10th year.

The year of reference for the above corresponds to a period of 12 months from the date of payment or the first payment of the loan capital.

And if this cannot be your solution for one reason or another, consider a sale with supplementary annuities: you sell your house for a lump sum ("bouquet" in French) , the rest of the sales price is paid to you in annuities. You can either stay in your house until the end ("vente en viager") or decide to travel the world (or opt for the comfort of a nursing home) which allows your buyer to use the house while paying annuities for 10 or 15 years for example ("vente à terme).

Even with increasingly narrowed pensions: there ARE solutions to keep on profiting after 75!